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|Title:||Do expected business conditions explain the value premium?|
|Citation:||Fong, W.M. (2012). Do expected business conditions explain the value premium?. Journal of Financial Markets 15 (2) : 181-206. ScholarBank@NUS Repository. https://doi.org/10.1016/j.finmar.2011.08.004|
|Abstract:||This study employs a new data set to re-examine the book-to-market effect. In contrast to past studies, a direct measure of expected business conditions is used to test whether the value premium is compatible with a risk-based explanation. The measure of expected business conditions is based on the Livingston survey of real GDP growth forecasts, and spans half a century. These forecasts are used to perform a comprehensive set of conditional (time series) and unconditional (cross-sectional) tests of the risk-based hypothesis. None of the tests provide firm evidence that the value premium can be explained by business risk. Evidence against the risk-based explanation is strongest for small firms. © 2011 Elsevier B.V.|
|Source Title:||Journal of Financial Markets|
|Appears in Collections:||Staff Publications|
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