TY - JOUR
T1 - The Value Premium for Small-Capitalization Stocks
AU - Dhatt, Manjeet S.
AU - Kim, Yong H.
AU - Mukherji, Sandip
PY - 1999
Y1 - 1999
N2 - We investigated whether an exploitable value premium existed for stocks in the Russell 2000 Index, the commonly used U.S. small-cap benchmark, in the 1979-97 period. For portfolios formed on the basis of price-to-earnings, price-to-sales, and market-to-book ratios, value stocks in the study outperformed growth stocks by 5.28-8.40 percentage points a year and had lower standard deviations and lower coefficients of variation than growth stocks did. Combining the valuation measures to identify value boosted returns and improved the risk-return characteristics of value portfolios. Most of the value premium for small-cap stocks occurred outside the month of January and was available for reasonably liquid stocks. These findings suggest that small-cap stocks offer a substantial value premium that is of practical significance to investors.
AB - We investigated whether an exploitable value premium existed for stocks in the Russell 2000 Index, the commonly used U.S. small-cap benchmark, in the 1979-97 period. For portfolios formed on the basis of price-to-earnings, price-to-sales, and market-to-book ratios, value stocks in the study outperformed growth stocks by 5.28-8.40 percentage points a year and had lower standard deviations and lower coefficients of variation than growth stocks did. Combining the valuation measures to identify value boosted returns and improved the risk-return characteristics of value portfolios. Most of the value premium for small-cap stocks occurred outside the month of January and was available for reasonably liquid stocks. These findings suggest that small-cap stocks offer a substantial value premium that is of practical significance to investors.
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U2 - 10.2469/faj.v55.n5.2300
DO - 10.2469/faj.v55.n5.2300
M3 - Article
AN - SCOPUS:0347022133
SN - 0015-198X
VL - 55
SP - 60
EP - 68
JO - Financial Analysts Journal
JF - Financial Analysts Journal
IS - 5
ER -