Value stocks and market efficiency

Roger Best, Ronald Best and James Yoder ()

Journal of Economics and Finance, 2000, vol. 24, issue 1, 28-35

Abstract: We form portfolios based on firm book-to-market equity ratios and apply stochastic dominance tests. Value (high book-to-market) portfolios dominate low book-to-market portfolios. Thus, value stocks are not rationally priced by the market and the book-to-market ratio is not an efficiently priced proxy for equity risk. We also find that the superior performance of value stocks is not due to the January effect. Copyright Springer 2000

Date: 2000
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DOI: 10.1007/BF02759693

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