The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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Good News for Value Stocks: Further Evidence on Market Efficiency
Published: 04/18/2012 | DOI: 10.1111/j.1540-6261.1997.tb04825.x
RAFAEL LA PORTA, JOSEF LAKONISHOK, ANDREI SHLEIFER, ROBERT VISHNY
This article examines the hypothesis that the superior return to so‐called value stocks is the result of expectational errors made by investors. We study stock price reactions around earnings announcements for value and glamour stocks over a 5‐year period after portfolio formation. The announcement returns suggest that a significant portion of the return difference between value and glamour stocks is attributable to earnings surprises that are systematically more positive for value stocks. The evidence is inconsistent with a risk‐based explanation for the return differential.