Is the Value Premium Smaller Than We Thought?

47 Pages Posted: 16 Jul 2021 Last revised: 30 Aug 2021

Date Written: July 14, 2021


The construction of the original HML portfolio (Fama and French, 1993) includes six seemingly innocuous decisions that could easily have been replaced with alternatives that are just as reasonable. I propose such alternatives and construct HML portfolios. In sample, the average estimate of the value premium is dramatically smaller than the original estimate of the value premium. The difference is 0.09% per month and statistically significant. Out of sample, however, this difference is statistically indistinguishable from zero. The results suggest that the original value premium estimate is upward biased because of a chance result in the original research decisions.

Keywords: Value Premium, Value Factor, HML Portfolio, Book-to-Market Equity, Chance Result, Statistical Biases

JEL Classification: G1, G11, G12, G14

Suggested Citation

Hasler, Mathias, Is the Value Premium Smaller Than We Thought? (July 14, 2021). Available at SSRN: or

Mathias Hasler (Contact Author)

Boston College ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States


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