Is the Value Spread a Good Predictor of Stock Returns? UK Evidence期刊界 All Journals 搜尽天下杂志传播学术成果专业期刊搜索期刊信息化学术搜索

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Is the Value Spread a Good Predictor of Stock Returns? UK Evidence

Authors:	Maria Michou

Institution:	The author is from the University of Edinburgh Business School. She would like to thank Peter Pope (editor) and the anonymous referee for their valuable and constructive comments. She is also very grateful to Pauline Weetman and Falconer Mitchell for helpful discussions and their helpful comments in revising the paper.

Abstract:	Abstract: This paper explores the predictive ability of the value spread in the UK. I replicate the US analysis of Liu and Zhang (2007) using UK data. In addition, I extend their work by exploring the predictive ability of the book-to-market, market-to-book and value spread on other size and value investment strategies, namely: large-caps only; small-caps minus large-caps (SML); value stocks only; growth stocks only; value stocks minus growth stocks (VMG) and a market portfolio that includes all stocks. The results are consistent with Liu and Zhang (2007) on the value spread. The value spread shows no predictive power for portfolio returns. Therefore, I show that the predictive power of book-to-market and market-to-book spreads depend on the portfolio formation strategies and the relative proportion of small-cap, large-cap, value and growth stocks in the portfolio.

Keywords:	Fama and French asset pricing cross section of expected returns book-to-market size