Is Value Riskier than Growth?

23 Pages Posted: 28 Jan 2005  

Ralitsa Petkova

Case Western Reserve University - Department of Banking & Finance

Lu Zhang

Ohio State University - Fisher College of Business; National Bureau of Economic Research (NBER)

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Abstract

We study the risk of value and growth stocks. We find that time-varying risk goes in the right direction in explaining the value premium. Value betas tend to covary positively, and growth betas tend to covary negatively with the expected market risk premium. Our inference differs from that of previous studies because we sort conditional betas on the expected market risk premium, instead of on the realized market excess return. However, we also find that this beta-premium covariance is too small to explain the observed magnitude of the value premium within the conditional CAPM.

Suggested Citation

Petkova, Ralitsa and Zhang, Lu, Is Value Riskier than Growth?. Journal of Financial Economics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=655403

Ralitsa Petkova

Case Western Reserve University - Department of Banking & Finance ( email )

10900 Euclid Ave.
Cleveland, OH 44106-7235
United States

Lu Zhang (Contact Author)

Ohio State University - Fisher College of Business ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States
585-267-6250 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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