Capturing the Value Premium in the United Kingdom

Posted: 25 Jan 2004 Last revised: 7 Oct 2011

See all articles by Elroy Dimson

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; CESifo (Center for Economic Studies and Ifo Institute)

Garrett Quigley

Global Systematic Investors LLP

Abstract

Using a new data set of accounting information merged with share price data, we found a strong value premiumin in the United Kingdom for the period 1955-2001. It existed among small-capitalization and large-capitalization stocks. But small-cap stock managers who wish to capture the higher expected returns face some challenges. We show that rebalancing-induced portfolio turnover for indexed small-cap value strategies can be substantial. Coupled with the relative illiquidity of the U.K. market for small-cap value stocks, such high turnover calls for strategies that sacrifice tracking accuracy in favor of reducing trading needs and lowering trading costs.

Keywords: Portfolio Management, equity strategies

JEL Classification: G12, G14, M41

Suggested Citation

Dimson, Elroy and Nagel, Stefan and Quigley, Garrett, Capturing the Value Premium in the United Kingdom. Financial Analysts Journal, Vol. 59, No. 6, pp. 35-45, November/December 2003. Available at SSRN: https://ssrn.com/abstract=489509

Elroy Dimson (Contact Author)

University of Cambridge - Judge Business School ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom
+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

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 )

London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Garrett Quigley

Global Systematic Investors LLP ( email )

75 King William Street
London, EC4N 7BE
United Kingdom

HOME PAGE: http://www.gsillp.com

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