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Good News for Value Stocks: Further Evidence on Market Efficiency

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  • LaPorta, Rafael
  • Lakonishok, Josef
  • Shleifer, Andrei
  • Vishny, Robert

Abstract

This paper examines the hypothesis that the superior return to so-called value stocks is the result of expectational errors made by investors. We study stock price reactions around earnings announcements for value and glamour stock over a 5 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.

Suggested Citation

  • LaPorta, Rafael & Lakonishok, Josef & Shleifer, Andrei & Vishny, Robert, 1997. "Good News for Value Stocks: Further Evidence on Market Efficiency," Scholarly Articles 30725119, Harvard University Department of Economics.
    • Handle: RePEc:hrv:faseco:30725119
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