TY  - JOUR
AU  - Chen,Long
AU  - Petkova,Ralitsa
AU  - Zhang,Lu
TI  - The Expected Value Premium
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12183
PY  - 2006
Y2  - May 2006
UR  - http://www.nber.org/papers/w12183
L1  - http://www.nber.org/papers/w12183.pdf
N1  - Author contact info:
Long Chen
212 Simon Hall
1 Olympian Way
John M. Olin Business School
Washington University in St. Louis
St. Louis MO 63130
Tel: 517-353-2955
Fax: 517-432-1080
E-Mail: lchen29@wustl.edu

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  - Fama and French (2002) estimate the equity premium using dividend growth rates to measure the expected rate of capital gain. We use similar methods to study the value premium. From 1941 to 2002, the expected HML return is on average 5.1% per annum, consisting of an expected-dividend-growth component of 3.5% and an expected-dividend-to-price component of 1.6%. The ex-ante HML return is also countercyclical: a positive, one-standard-deviation shock to real consumption growth rate lowers this premium by about 0.45%. Unlike the equity premium, there is only mixed evidence suggesting that the value premium has declined over time.
ER  -