Is value riskier than growth? |
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| Institution: | 1. Department of Business Administration, Ling Tung University, Taichung, Taiwan;2. Department of Finance, Feng Chia University, Taichung, Taiwan;3. Department of Industrial Engineering and Management, National Chin-Yi University of Technology, Taichung, Taiwan;4. Department of International Trade, Feng Chia University, Taichung, Taiwan;1. School of Business, University of Connecticut, 2100 Hillside Road, Storrs, CT 06269, USA;2. Fisher College of Business, Ohio State University, 2100 Neil Avenue, Columbus OH 43210, USA;3. China Academy of Financial Research (CAFR), China;4. London Business School, Regent’s Park, Sussex Place, London NW1 4SA, UK;5. The Center for Economic and Policy Research (CEPR), USA;6. Cheung Kong Graduate School of Business, 1 East Chang An Avenue, Oriental Plaza, Beijing 100738, China;7. National Bureau of Economic Research (NBER), USA |
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| Abstract: | We study the relative risk of value and growth stocks. We find that time-varying risk goes in the right direction in explaining the value premium. Value betas tend to covary positively, and growth betas tend to covary negatively with the expected market risk premium. Our inference differs from that of previous studies because we sort betas on the expected market risk premium, instead of on the realized market excess return. However, we also find that this beta-premium covariance is too small to explain the observed magnitude of the value premium within the conditional capital asset pricing model. |
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