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On the Value Premium in Malaysia

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Author Info
Michael E. Drew
Madhu Veeraraghavan

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Abstract

Davis, Fama and French (2000) report that the value premium in United States’ stocks is robust. Herein, we present out-of-sample evidence for Malaysia, finding that value stocks outperform growth stocks and document an arbitrage opportunity. We observe that the mean monthly returns are substantially higher for the two mimic portfolios (SMB and HML) when compared with the market portfolio. For the period 1991 through 1999, an investor generated 1.92% (annually) holding the market portfolio in Malaysia, compared with the two mimic portfolios, SMB and HML with returns of 17.70% and 17.69% respectively. We also observe that the standard deviations for the two mimic portfolios are significantly lower than the standard deviation of the market portfolio. Moreover, the findings presented in this study reject the notion of survivorship bias advanced by Kothari, Shanken and Sloan (1995) and the data-snooping hypothesis attributed to Black (1993) and Mackinlay (1995) as an explanation for the value premium.

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Publisher Info
Paper provided by School of Economics and Finance, Queensland University of Technology in its series School of Economics and Finance Discussion Papers and Working Papers Series with number 092.

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Date of creation: 20 May 2001
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Handle: RePEc:qut:dpaper:092

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Related research
Keywords: Asset pricing; multifactor models; value premium; arbitrage;

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Find related papers by JEL classification:
G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

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  4. Fama, Eugene F. & French, Kenneth R., 1993. "Common risk factors in the returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 33(1), pages 3-56, February. [Downloadable!] (restricted)
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    Other versions:
  7. Jagannathan, Ravi & Wang, Zhenyu, 1996. " The Conditional CAPM and the Cross-Section of Expected Returns," Journal of Finance, American Finance Association, vol. 51(1), pages 3-53, March. [Downloadable!] (restricted)
    Other versions:
  8. Banz, Rolf W., 1981. "The relationship between return and market value of common stocks," Journal of Financial Economics, Elsevier, vol. 9(1), pages 3-18, March. [Downloadable!] (restricted)
  9. Knez, Peter J & Ready, Mark J, 1997. " On the Robustness of Size and Book-to-Market in Cross-Sectional Regressions," Journal of Finance, American Finance Association, vol. 52(4), pages 1355-82, September. [Downloadable!] (restricted)
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  11. Reinganum, Marc R., 1983. "The anomalous stock market behavior of small firms in January : Empirical tests for tax-loss selling effects," Journal of Financial Economics, Elsevier, vol. 12(1), pages 89-104, June. [Downloadable!] (restricted)
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  15. Fama, Eugene F & French, Kenneth R, 1995. " Size and Book-to-Market Factors in Earnings and Returns," Journal of Finance, American Finance Association, vol. 50(1), pages 131-55, March. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Kathleen Goffey & Andrew Worthington, 2002. "Motor Vehicle Usage Patterns in Australia: A Comparative Analysis of Driver, Vehicle & Purpose Characteristics for Household & Freight Travel," School of Economics and Finance Discussion Papers and Working Papers Series 117, School of Economics and Finance, Queensland University of Technology. [Downloadable!]
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