 Anatomy of recent value premium's travailsLibo Yin and Huiyi Liao International Review of Financial Analysis, 2024, vol. 94, issue C Abstract: The recent underperformance of the value effect has prompted investors to question whether the value effect has lost its potency. In the Chinese A-share market where the value effect has vanished like in the U.S. market, there is a negative relationship between value and composite profitability, a metric comprising profitability levels and earnings growth. This steadily intensifying relationship, coupled with the positive and stable composite profitability premium, causes the weakening effect of composite profitability on the value premium to grow more pronounced over time. This substantial dampening effect, the primary driver of the time variations of the value premium, is precisely why the value premium, although impressive in its early stages, remains ineffective over the nearly two decades of the entire sample period. When the interference of composite profitability is removed, the value effect experiences a significant resurgence, boosting returns to an astonishing 1.97% per month. Keywords: Value effect; Composite profitability; Chinese market (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:94:y:2024:i:c:s1057521924002576 DOI: 10.1016/j.irfa.2024.103325 Access Statistics for this article International Review of Financial Analysis is currently edited by B.M. Lucey More articles in International Review of Financial Analysis from Elsevier |
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