La Porta is from Harvard University, Lakonishok is from the University of Illinois, Shleifer is from Harvard University, and Vishny is from the University of Chicago. We thank Gene Fama, Steve Kaplan, and an anonymous referee for helpful comments. Financial support was provided by the National Science Foundation, the Bradley Foundation, and the National Bureau of Economic Research Asset Management Research Advisory Group.
Good News for Value Stocks: Further Evidence on Market Efficiency
Article first published online: 18 APR 2012
1997 The American Finance Association
The Journal of Finance
Volume 52, Issue 2, pages 859–874, June 1997
How to Cite
PORTA, R. L., LAKONISHOK, J., SHLEIFER, A. and VISHNY, R. (1997), Good News for Value Stocks: Further Evidence on Market Efficiency. The Journal of Finance, 52: 859–874. doi: 10.1111/j.1540-6261.1997.tb04825.x
- Issue published online: 18 APR 2012
- Article first published online: 18 APR 2012
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.