Testing and Aggressive Investment Strategy Using Value Line Ranks: A Reply



This paper answers the comments of readers of our earlier paper. Additional insight is gained by adding recent data to show the effect of following Value Line Investment Service recommendations in active stock market trading over the years 1974–81. We show that Value Line makes a statistically significant contribution, which cannot be explained by the Beta risk factor. We offer our results as an unexplained divergence from the Efficient Market Hypothesis, but with the tentative hypothesis that investment timing (i.e., the fact that the Efficient Market Hypothesis does not operate instantaneously) may explain much of the abnormality.