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The Value Line Enigma: The Sum of Known Parts?

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  • Choi, James J.

Abstract

The investment advice encapsulated in the Value Line Investment Survey's timeliness rankings is evaluated from 1965 to 1996 through time-series factor regressions, as well as by comparing recommendations to benchmark portfolios corresponding to their size, book-to-market, and momentum characteristics. In addition, recommendations that have experienced recent earnings surprises are purged to eliminate the effects of post-earnings announcement drift. There is evidence that Value Line recommendations exhibit performance beyond what is predicted by existing models of expected return. However, once transactions costs have been accounted for, it is doubtful profitable abnormal returns could have been realized.

Suggested Citation

  • Choi, James J., 2000. "The Value Line Enigma: The Sum of Known Parts?," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 35(3), pages 485-498, September.
    • Handle: RePEc:cup:jfinqa:v:35:y:2000:i:03:p:485-498_00
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    Cited by:

    1. Fink, Josef, 2021. "A review of the Post-Earnings-Announcement Drift," Journal of Behavioral and Experimental Finance, Elsevier, vol. 29(C).
    2. David R. Gallagher & Prashanthi Nadarajah & Matt Pinnuck, 2006. "Top Management Turnover: An Examination of Portfolio Holdings and Fund Performance," Australian Journal of Management, Australian School of Business, vol. 31(2), pages 265-292, December.
    3. Szakmary, Andrew C. & Conover, C. Mitchell & Lancaster, Carol, 2008. "An examination of Value Line's long-term projections," Journal of Banking & Finance, Elsevier, vol. 32(5), pages 820-833, May.
    4. Lesmond, David A. & Schill, Michael J. & Zhou, Chunsheng, 2004. "The illusory nature of momentum profits," Journal of Financial Economics, Elsevier, vol. 71(2), pages 349-380, February.
    5. David R. Gallagher & Matt Pinnuck, 2006. "Seasonality in Fund Performance: An Examination of the Portfolio Holdings and Trades of Investment Managers," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 33(7‐8), pages 1240-1266, September.
    6. Josef Fink, 2020. "A Review of the Post-Earnings-Announcement Drift," Working Paper Series, Social and Economic Sciences 2020-04, Faculty of Social and Economic Sciences, Karl-Franzens-University Graz.
    7. Prombutr, Wikrom & Lockwood, Jimmy & Zhang, Ying & Le, Steven V., 2016. "Investor response to online value line rank changes: Foreign versus local stocks," Global Finance Journal, Elsevier, vol. 30(C), pages 10-26.
    8. Ramnath, Sundaresh & Rock, Steve & Shane, Philip, 2008. "The financial analyst forecasting literature: A taxonomy with suggestions for further research," International Journal of Forecasting, Elsevier, vol. 24(1), pages 34-75.
    9. Marcus Schulmerich & Yves-Michel Leporcher & Ching-Hwa Eu, 2015. "Stock Market Anomalies," Management for Professionals, in: Applied Asset and Risk Management, edition 127, chapter 3, pages 175-244, Springer.
    10. Ryan Flugum, 2021. "The trend is an analyst's friend: Analyst recommendations and market technicals," The Financial Review, Eastern Finance Association, vol. 56(2), pages 301-330, May.
    11. Martineau, Charles, 2021. "Rest in Peace Post-Earnings Announcement Drift," SocArXiv z7k3p, Center for Open Science.

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