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Access via FulcrumThe Expected Value Premium
Zhang, Lu; Petkova, Ralitsa; Chen, Long
2006-09
Subjects
The value premium expected returns dividend growth dividend price ratio
Abstract
Fama and French (2002) estimate the equity premium using dividend growth rates to measure expected rates of capital gain. We use a similar method to study the value premium. From 1941 to 2005, the expected HML return is on average 6.0% per annum, consisting of an expected dividend-growth component of 4.4% and an expected dividend-price-ratio component of 1.6%. The expected HML return is also countercyclical: a positive, one-standard-deviation shock to real consumption growth lowers this premium by about 0.40%. Unlike the equity premium, there is only mixed evidence suggesting that the expected value premium has declined over time.Other Identifiers
1049
Other Identifiers
1049
Subject Classification
Finance
Types
Working Paper
Metadata
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