Capturing the Value Premium in the United Kingdom
Posted: 25 Jan 2004 Last revised: 7 Oct 2011
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: Suggested Citation