Stock Return Predictability of Residual-Income-Based Valuation: Risk or Mispricing?

• Autores: Lee-Seok Hwang, Woo Jong Lee
• Localización: Abacus: A journal of accounting, finance and business studies, ISSN 0001-3072, Vol. 49, Nº 2, 2013, págs. 219-241
• Idioma: inglés
• Texto completo no disponible (Saber más ...)
• Resumen

  • In an influential paper, Frankel and Lee (1998) conclude that the stock return predictability of the value-to-price ratio (V/P) results from market mispricing. This paper confirms whether the V/P reflects the rational risk premiums associated with the V/P factor or is better explained by market inefficiency. Following Daniel and Titman (1997), this paper examines whether the V/P characteristics or the V/P factor loadings predict stock returns. The findings show that the V/P loadings are positively associated with average returns even after controlling for the V/P characteristics in both time series and cross-sectional tests. The overall results suggest that the mispricing explanation of the V/P effect is premature.