John A. Doukas (Old Dominion University, New York University, and Cardiff Business School,) Chansog (Francis) Kim (Queens College of City University of New York,) Christos Pantzalis (University of South Florida)
Abstract
Several empirical studies show that investment strategies that favor the purchase of stocks with low prices relative to conventional measures of value yield higher returns. Some of these studies imply that investors are too optimistic about (glamour) stocks that have had good performance in the recent past and too pessimistic about (value) stocks that have performed poorly. We examine whether investors systematically overestimate (underestimate) the future earnings performance of glamour (value) stocks over the 1976 to 1997 period. Our results fail to support the extrapolation hypothesis that posits that the superior performance of value stocks is because investors make systematic errors in predicting future growth in earnings of out-of-favor stocks. Copyright The American Finance Association 2002.
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Volume (Year): 57 (2002) Issue (Month): 5 (October) Pages: 2143-2165 Download reference. The following formats are available: HTML
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