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Capturing the value premium – global evidence from a fair value-based investment strategy

René-Ojas Woltering, Christian Weis, Felix Schindler and Steffen Sebastian

Journal of Banking & Finance, 2018, vol. 86, issue C, 53-69

Abstract: This paper examines the risk premium of value stocks within a global investment strategy framework. We test whether absolute or relative mispricing is better suited to capturing the global value premium by using fair value-based net asset values (NAVs) as our proxies for fundamental value. We find that investing in the most underpriced stocks relative to the average ratio of price to fundamental value in a country is the key to achieving superior risk-adjusted returns. The annualized excess return of the global value portfolio sorted according to relative mispricing is 10.0%, and remains significant after controlling for common risk factors.

Keywords: Value premium; Global diversification; Net asset value; Investment strategy (search for similar items in EconPapers)
JEL-codes: G11 G12 G14 G15 (search for similar items in EconPapers)
Date: 2018
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Handle: RePEc:eee:jbfina:v:86:y:2018:i:c:p:53-69