Value versus Growth: The International Evidence

Authors

  • Eugene F. Fama,

    1. Graduate School of Business, University of Chicago
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  • Kenneth R. French

    1. Sloan School of Management, Massachusetts Institute of Technology
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    • Graduate School of Business, University of Chicago (Fama), and Sloan School of Management, Massachusetts Institute of Technology (French). The paper ref lects the helpful comments of David Booth, Ed George, Rex Sinquefield, René Stulz, Janice Willett, and three referees. The international data for this study were purchased for us by Dimensional Fund Advisors.

ABSTRACT

Value stocks have higher returns than growth stocks in markets around the world. For the period 1975 through 1995, the difference between the average returns on global portfolios of high and low book-to-market stocks is 7.68 percent per year, and value stocks outperform growth stocks in twelve of thirteen major markets. An international capital asset pricing model cannot explain the value premium, but a two-factor model that includes a risk factor for relative distress captures the value premium in international returns.

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