The Value Spread

Cohen, Randolph B.; Polk, Christopher; Vuolteenaho, Tuomo

doi:10.3386/w8242

Cited by 122 publications

(187 citation statements)

References 15 publications

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“…Growth, as represented by R&D intensity, is positively associated with Tobin's q at the 1% level, implying that the Tobin's q ‐ratio reflects future growth opportunities (Lang et al, 1989). This positive result supports the evidence provided by Cohen et al. (2001) that equity market value reflects the profitability outcomes of growth opportunities over the long run.…”

Section: Descriptive Statistics and Regression Resultssupporting

confidence: 87%

Voluntary Appointment of Independent Directors in Taiwan: Motives and Consequences

Young

Tsai

Hsieh

2008

Business Fin & Account

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This study explores factors that motivate firms to increase board independence in the absence of legal requirements to do so. In addition, we examine the impact of voluntary enhancement of board independence on firm performance. Using a sample of listed companies in Taiwan, we show that voluntary appointment of independent directors is associated with both economic factors and managerial power. Specifically, we find that board independence increases with the weaknesses of alternative corporate governance mechanisms and the severity of agency problems. However, board independence decreases with managerial ownership and family control. In addition, by employing a simultaneous equations model with selectivity, we provide evidence supporting the positive performance impact of voluntary appointment of independent directors in Taiwan. Copyright (c) 2008 The Authors Journal compilation (c) 2008 Blackwell Publishing Ltd.

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Section: Descriptive Statistics and Regression Resultssupporting

confidence: 87%

Voluntary Appointment of Independent Directors in Taiwan: Motives and Consequences

Young

Tsai

Hsieh

2008

Business Fin & Account

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“…We are not the first to study whether the value premium is predictable. Prior studies have documented some suggestive evidence using predictive regressions (Jagannathan and Wang, 1996;Pontiff and Schall, 1999;Lettau and Ludvigson, 2001;Cohen, Polk, and Vuolteenaho, 2003). However, the issue remains controversial.…”

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confidence: 99%

Value versus Growth: Time‐Varying Expected Stock Returns

Gulen

Xing

Zhang

2011

Financial Management

118

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Is the value premium predictable? We study time variations of the expected value premium using a two‐state Markov switching model. We find that when conditional volatilities are high, the expected excess returns of value stocks are more sensitive to aggregate economic conditions than the expected excess returns of growth stocks. As a result, the expected value premium is time varying. It spikes upward in the high volatility state, only to decline more gradually in the subsequent periods. However, out‐of‐sample predictability of the value premium is close to nonexistent.

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“…Since the index-level data from Datastream have already been adjusted for equity offerings, no further adjustment is necessary here. Aside from being consistent with the analysis in Cohen et al (2003), our use of clean-surplus earnings is also motivated by necessity-as even in countries for which Datastream does report a net profits series, the series' internal consistency with the P/B series (at the country index level) is suspect. In particular, the accuracy of the approximation in equation (4) below deteriorates by almost 50 percent when these net profits series are used.…”

Section: The Cross-sectional Relationshipmentioning

confidence: 86%

“…Our variance decomposition approach in identifying possible sources of stock price variations, first introduced by Campbell and Shiller (1988), has been used by many authors to account for time-series variations in stock price at the aggregate market level. Vuolteenaho (2002) is the first to apply this methodology to the firm level and Cohen, Polk, and Vuolteenaho (2003) carry out a cross-sectional variance decomposition on U.S. equity portfolios. Chaves (2009) further shows that the relative importance of cash flows versus discount rates in the variance decomposition depends on whether a time series or cross-sectional analysis is performed.…”

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confidence: 99%

Understanding Cross‐Country Differences in Valuation Ratios: A Variance Decomposition Approach

Chue

2015

Contemporary Accting Res

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We use a variance decomposition approach to examine why aggregate valuation ratios differ across countries. In a cross section of 22 developed countries from 1980 to 2009, we find that 50 percent of all cross‐country differences in the aggregate price‐to‐book ratio (P/B) can be explained by cross‐country differences in expected future five‐year profitability. In the second half of our sample period, this percentage exceeds that of the first half, rising to almost 64 percent. Although international differences in accounting standards and conventions may have made earnings from different countries more difficult to compare relative to dividends, we find that it is still cross‐country differences in expected future profitability, rather than dividend growth rates, that are more closely related to international differences in valuation ratios. Even among 25 emerging markets, we find that expected future profitability at the five‐year horizon can account for 29 percent of all cross‐country P/B variations. Our results show that international investors are able to identify substantial cross‐country differences in future‐earnings prospects and incorporate them into stock market valuations.

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The Value Spread

Cited by 122 publications

References 15 publications

Voluntary Appointment of Independent Directors in Taiwan: Motives and Consequences

Voluntary Appointment of Independent Directors in Taiwan: Motives and Consequences

Value versus Growth: Time‐Varying Expected Stock Returns

Understanding Cross‐Country Differences in Valuation Ratios: A Variance Decomposition Approach

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