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Identifying Expectation Errors in Value/Glamour Strategies: A Fundamental Analysis Approach

SSRN Electronic Journal
2012
  • 51
    Citations
  • 32,288
    Usage
  • 47
    Captures
  • 1
    Mentions
  • 1
    Social Media
Metric Options:   Counts1 Year3 Year

Metrics Details

  • Citations
    51
    • Citation Indexes
      51
  • Usage
    32,288
    • Abstract Views
      26,987
    • Downloads
      5,301
  • Captures
    47
    • Readers
      40
    • Exports-Saves
      7
      • SSRN
        7
  • Mentions
    1
    • News Mentions
      1
      • News
        1
  • Social Media
    1
    • Shares, Likes & Comments
      1
      • Facebook
        1
  • Ratings
    • Download Rank
      3,371

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Article Description

It is well established that value stocks outperform glamour stocks, yet considerable debate exists about whether the return differential reflects compensation for risk or mispricing. Under mispricing explanations, prices of glamour (value) firms reflect systematically optimistic (pessimistic) expectations; thus, the value/glamour effect should be concentrated (absent) among firms with (without) ex ante identifiable expectation errors. Classifying firms based upon whether expectations implied by current pricing multiples are congruent with the strength of their fundamentals, we document that value/glamour returns and ex post revisions to market expectations are predictably concentrated (absent) among firms with ex ante biased (unbiased) market expectations.

Bibliographic Details

Joseph D. Piotroski; Eric C. So

Elsevier BV

Financial Statement Analysis; value; glamour; market efficiency; expectation errors

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