Factor Value

Shaojun Zhang

Working Paper Series from Ohio State University, Charles A. Dice Center for Research in Financial Economics

Abstract: This paper finds that the value anomaly summarizes time series predictability in other factors using value and reversal spreads, representing differences in log value-weighted book-to-market ratios and minus past long-term stock returns between factor legs. Factors only yield significantly positive returns when the spreads exceed historical median. Employing value and reversal spreads, factor value strategy outperforms and explains various value-style anomalies. Value anomalies time other factors with factor loading increasing in the spreads. Factor predictability is consistent with persistent overpricing correction and asymmetric limits of arbitrage, introducing additional restrictions for models explaining cross-sectional and time-series equity returns simultaneously.

JEL-codes: F0 F3 G0 G1 (search for similar items in EconPapers)
Date: 2023-12
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Persistent link: https://EconPapers.repec.org/RePEc:ecl:ohidic:2023-24

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