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Capturing the Value Premium in the U.K. 1955-2001

27 Pages Posted: 12 Mar 2003  

Elroy Dimson

University of Cambridge - Judge Business School; London Business School

Stefan Nagel

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research

Garrett Quigley

Dimensional Fund Advisors Ltd

Date Written: January 2003

Abstract

Using a new dataset of accounting information merged with share price data we find a strong value premium in the U.K. for the period 1955-2001. It exists among small-caps as well as among large-caps. However, there are challenges for small-cap managers wishing to capture these higher expected returns. We show that rebalancing-induced portfolio turnover for indexed small-value strategies can be substantial. Coupled with the relative illiquidity of the U.K. market for small-value stocks, this calls for strategies that sacrifice tracking accuracy in favor of reduced trading needs and lower trading costs.

Keywords: Value Premium, Book-to-Market, Trading Cost

JEL Classification: G12, G14

Suggested Citation

Dimson, Elroy and Nagel, Stefan and Quigley, Garrett, Capturing the Value Premium in the U.K. 1955-2001 (January 2003). Available at SSRN: https://ssrn.com/abstract=376340 or http://dx.doi.org/10.2139/ssrn.376340

Elroy Dimson

University of Cambridge - Judge Business School ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom
+44 20 7000 8212 (Phone)
+44 700 607 7390 (Fax)

London Business School ( email )

Sussex Place
Regent's Park
London, NW1 4SA
United Kingdom
44 20 7000 7000 (Phone)
44 700 607 7390 (Fax)

Stefan Nagel (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research ( email )

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Garrett Quigley

Dimensional Fund Advisors Ltd ( email )

7 Down Street
London, W1J 7AJ
United Kingdom
+44(44 20) 7016 4509 (Phone)
(44 20) 7495 4242 (Fax)

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