TY  - JOUR
AU  - Lu,Naiping
AU  - Zhang,Lu
TI  - The Value Spread as a Predictor of Returns
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11326
PY  - 2005
Y2  - May 2005
UR  - http://www.nber.org/papers/w11326
L1  - http://www.nber.org/papers/w11326.pdf
N1  - Author contact info:
Lu Zhang
Fisher College of Business
The Ohio State University
2100 Neil Avenue
Columbus, OH 43210
Tel: 585-267-6250
E-Mail: zhanglu@fisher.osu.edu
AB  - Recent studies have used the value spread to predict aggregate stock returns to construct cash-flow betas that appear to explain the size and value anomalies. We show that two related variables, the book-to-market spread (the book-to-market of value stocks minus that of growth stocks) and the market-to-book spread (the market-to-book of growth stocks minus that of value stocks) predict returns in different directions and exhibit opposite cyclical variations. Most important, the value spread mixes information on the book-to-market and market-to-book spreads, and  appears much less useful in predicting returns.
ER  -