Value Uncertainty

Turan G. Bali; L. Del Viva; Menatalla El Hefnawy; Lenos Trigeorgis

doi:10.1287/mnsc.2023.4888

Value Uncertainty

Turan G. Bali, L. Del Viva, Menatalla El Hefnawy, Lenos Trigeorgis

Departament d'Economia, Finances i Comptabilitat

Producció científica: Article en revista indexada › Article › Avaluat per experts

Resum

We examine how time-series volatility of book-to-market (UNC) is priced in equity returns and the relative contributions of its book volatility (variations in earnings and book value) and market volatility components (shocks in required return). UNC captures valuation risk, so stocks with high valuation risk earn higher return. An investment strategy long in high-UNC firms and short in low-UNC firms generates 8.5% annual risk-adjusted return. UNC valuation risk premium is driven by outperformance of high-UNC firms facing higher information risk and is not explained by established risk factors and firm characteristics.

Idioma original	Anglès
Pàgines (de-a)	4548-4563
Nombre de pàgines	16
Revista	Management Science
Volum	70
Número	7
DOIs	https://doi.org/10.1287/mnsc.2023.4888
Estat de la publicació	Publicada - de jul. 2024

Accés al document

10.1287/mnsc.2023.4888

Altres arxius i enllaços

Enllaç a la publicació de Scopus

Com citar-ho

@article{a421b59bdd874386a9941b090368abed,

title = "Value Uncertainty",

abstract = "We examine how time-series volatility of book-to-market (UNC) is priced in equity returns and the relative contributions of its book volatility (variations in earnings and book value) and market volatility components (shocks in required return). UNC captures valuation risk, so stocks with high valuation risk earn higher return. An investment strategy long in high-UNC firms and short in low-UNC firms generates 8.5% annual risk-adjusted return. UNC valuation risk premium is driven by outperformance of high-UNC firms facing higher information risk and is not explained by established risk factors and firm characteristics.",

keywords = "book-to-market, equity returns, uncertainty, valuation risk",

author = "Bali, {Turan G.} and {Del Viva}, L. and {El Hefnawy}, Menatalla and Lenos Trigeorgis",

note = "Publisher Copyright: Copyright: {\textcopyright} 2023 INFORMS.",

year = "2024",

month = jul,

doi = "10.1287/mnsc.2023.4888",

language = "English",

volume = "70",

pages = "4548--4563",

journal = "Management Science",

issn = "0025-1909",

publisher = "INFORMS Institute for Operations Research and the Management Sciences",

number = "7",

}

TY - JOUR

T1 - Value Uncertainty

AU - Bali, Turan G.

AU - Del Viva, L.

AU - El Hefnawy, Menatalla

AU - Trigeorgis, Lenos

PY - 2024/7

Y1 - 2024/7

N2 - We examine how time-series volatility of book-to-market (UNC) is priced in equity returns and the relative contributions of its book volatility (variations in earnings and book value) and market volatility components (shocks in required return). UNC captures valuation risk, so stocks with high valuation risk earn higher return. An investment strategy long in high-UNC firms and short in low-UNC firms generates 8.5% annual risk-adjusted return. UNC valuation risk premium is driven by outperformance of high-UNC firms facing higher information risk and is not explained by established risk factors and firm characteristics.

AB - We examine how time-series volatility of book-to-market (UNC) is priced in equity returns and the relative contributions of its book volatility (variations in earnings and book value) and market volatility components (shocks in required return). UNC captures valuation risk, so stocks with high valuation risk earn higher return. An investment strategy long in high-UNC firms and short in low-UNC firms generates 8.5% annual risk-adjusted return. UNC valuation risk premium is driven by outperformance of high-UNC firms facing higher information risk and is not explained by established risk factors and firm characteristics.

KW - book-to-market

KW - equity returns

KW - uncertainty

KW - valuation risk

UR - http://www.scopus.com/inward/record.url?scp=85199370578&partnerID=8YFLogxK

U2 - 10.1287/mnsc.2023.4888

DO - 10.1287/mnsc.2023.4888

M3 - Article

AN - SCOPUS:85199370578

SN - 0025-1909

VL - 70

SP - 4548

EP - 4563

JO - Management Science

JF - Management Science

IS - 7

ER -

Value Uncertainty

Resum

Accés al document

Altres arxius i enllaços

Fingerprint

Com citar-ho