An Evolutionary Explanation of the Value Premium Puzzle

descriptionPublicationkeyboard_double_arrow_right Article , Other literature type 01 Jan 2010Embargo end date: 09 Jun 2017 Switzerland English Publisher:Elsevier BVJournal:SSRN Electronic Journal (eissn: 1556-5068,

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Authors: Hens, Thorsten; Lensberg, Terje; Schenk-Hoppé, Klaus Reiner; Wöhrmann, Peter;

doi: 10.2139/ssrn.1648847 , 10.1007/s00191-010-0213-1 , 10.3929/ethz-b-000041061 , 10.5167/uzh-40063

handle: 20.500.11850/41061

An Evolutionary Explanation of the Value Premium Puzzle

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Abstract

As early as 1934 Graham and Dodd conjectured that excess returns from value investment originate from a tendency of stock prices to converge towards a fundamental value. This paper confirms their insights within the evolutionary finance model of Evstigneev et al. (Econ Theory 27:449-468, (Evstigneev et al. 2006)). Our empirical results show the predictive power of the evolutionary benchmark valuation for the relative market capitalization and its dynamics in the sample of firms listed in the Dow Jones Industrial Average index in 1981-2009. © 2010 Springer-Verlag.

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Switzerland

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Keywords

Evolutionary finance, 1400 General Business, Management and Accounting, 10003 Department of Finance, Value premium, 2002 Economics and Econometrics, Value premium; Evolutionary finance, 330 Economics

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