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 Michigan, Stephen M. Ross School of Business; University of Michigan Department of Economics; 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 Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States

University of Michigan Department of Economics

Lorch Hall
Ann Arbor, MI 48109
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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