Home > Behavioral Econ. > The Role of Expectations in Value and Glamour Stock Returns

The Role of Expectations in Value and Glamour Stock Returns

The Role of Expectations in Value and Glamour Stock Returns

Journal of Behavioral Finance
Volume 12, Issue 2, 2011

Nicholas Magnusona

What happens when value and glamour stocks miss earnings expectation targets? Although, as expected, prices for glamour stocks have historically fallen, prices for value stocks have gone up—even when business fundamentals deteriorated based on results found in this study of global equities. These results suggest the superior returns delivered by value stocks may not be a result of positive developments relative to expectations but instead are more likely due to a gradual and corrective reversal of earlier overreaction and mispricing. This augments research by select scholars and provides fresh evidence explaining why value investing historically has been a successful long-term strategy.

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Categories: Behavioral Econ.
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