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The Relationship between the Value Effect and Industry Affiliation

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  • John C. Banko

    (University of Central Florida)

  • C. Mitchell Conover

    (E. Claiborne Robins School of Business, University of Richmond)

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    Abstract

    We examine industry affiliation and the relationship between stock returns and book-to-market equity (the value effect). The robustness of the value effect is supported as a significant value premium is shown to exist in 15 of 21 industries. Both industry- and firm-level value effects are identified; however, the firm-level effect is the more prominent of the two. Further, the value effect is shown to be strongest in value industries and weakest in growth industries. Finally, we show evidence consistent with the claim that the value premium is due to investors requiring higher returns from firms in distressed conditions.

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    Bibliographic Info

    Article provided by University of Chicago Press in its journal Journal of Business.

    Volume (Year): 79 (2006)
    Issue (Month): 5 (September)
    Pages: 2595-2616

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    Handle: RePEc:ucp:jnlbus:v:79:y:2006:i:5:p:2595-2616

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    Web page: http://www.journals.uchicago.edu/JB/

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    Cited by:
    1. Elizabeth Ooi & Paul Lajbcygier, 2013. "Virtue Remains After Removing Sin: Finding Skill Amongst Socially Responsible Investment Managers," Journal of Business Ethics, Springer, vol. 113(2), pages 199-224, March.

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