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Good News for Value Stocks: Further Evidence on Market Efficiency

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  • La Porta, Rafael, et al

Abstract

This article examines the hypothesis that the superior return to so-called value stocks is the result of expectational errors made by investors. The authors study stock price reactions around earnings announcements for value and glamour stocks over a five-year period after portfolio formation. The announcement returns suggest that a significant portion of the return difference between value and glamour stocks is attributable to earnings surprises that are systematically more positive for value stocks. The evidence is inconsistent with a risk-based explanation for the return differential. Coauthors are Josef Lakonishok, Andrei Shleifer, and Robert Vishny. Copyright 1997 by American Finance Association.

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  • La Porta, Rafael, et al, 1997. "Good News for Value Stocks: Further Evidence on Market Efficiency," Journal of Finance, American Finance Association, vol. 52(2), pages 859-874, June.
  • Handle: RePEc:bla:jfinan:v:52:y:1997:i:2:p:859-74
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