27 Pages Posted: 12 Mar 2003
Date Written: January 2003
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: 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