NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Good News for Value Stocks: Further Evidence on Market Efficiency

Rafael La Porta, Josef Lakonishok, Andrei Shleifer, Robert Vishny

NBER Working Paper No. 5311
Issued in October 1995
NBER Program(s):   AP

This paper 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.

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Published: Journal of Finance, Vol. 52, no. 2 (June 1997): 859-873.

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