Please use this identifier to cite or link to this item: http://hdl.handle.net/10397/18254
Title: Stock return predictability of residual-income-based valuation : risk or mispricing?
Authors: Hwang, LS
Lee, WJ
Keywords: Asset-pricing tests
Market efficiency
Mispricing
Risk
Value-to-price
Issue Date: 2013
Publisher: Wiley-Blackwell
Source: Abacus, 2013, v. 49, no. 2, p. 219-241 How to cite?
Journal: Abacus 
Abstract: 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.
URI: http://hdl.handle.net/10397/18254
ISSN: 0001-3072
EISSN: 1467-6281
DOI: 10.1111/abac.12007
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