Please use this identifier to cite or link to this item: https://doi.org/10.1016/j.finmar.2011.08.004
Title: Do expected business conditions explain the value premium?
Authors: Fong, W.M. 
Keywords: Asset pricing
Business risk
GDP forecasts
Predictive regressions
Value premium
Issue Date: 2012
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
URI: http://scholarbank.nus.edu.sg/handle/10635/44430
ISSN: 13864181
DOI: 10.1016/j.finmar.2011.08.004
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