Is Value Riskier than Growth?
Case Western Reserve University - Department of Banking & Finance
Ohio State University - Fisher College of Business; National Bureau of Economic Research (NBER)
Journal of Financial Economics, Forthcoming
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.
Number of Pages in PDF File: 23
Date posted: January 28, 2005