The Research of Value Premium in Taiwan Stock Market

• Main Authors: Ching-Lin Chang, 張景林
• Other Authors: Tzu-Ping Ho
• Format: Others
• Language: zh-TW
• Published: 2007
• Online Access: http://ndltd.ncl.edu.tw/handle/y3c25x

碩士 === 銘傳大學 === 國際企業學系碩士在職專班 === 95 === Abstract This paper sheds further light into the discussion of whether the value premium is driven by risk or behavioral（Mispricing or Errors-in-Expectations）factors by providing out of sample tests using Taiwan data, a search process that involves both P/E and P/BV ratios and a research methodology that minimizes any potential data snooping problems. We document a consistently strong value premium over the 87-95 sample period, our findings are as follows: 1. There is a negative relationship between the beta of a stock and the value premium. 2. The value premium is negative during recessions. 3. The value premium is negative during bear markets. 4. The value premium will increases over time. 5. There is a negative relationship between the market cap of a stock and the value premium. Finally, this papers shows that a P/E based search process does a better job in identifying value stocks than a search process based on P/BVs. In terms of explaining the drivers of the value premium, some of the previous studies have found support of risk-based explanations, while others have found support for the errors-in-expectations explanation. Even though, the scale of the evidence seems to lean more in favor of errors-in-expectations, but this is not surprising as depending on how fine the sortings are (and these studies have all used quite fine sortings) both schools of thought could be correct to some extent in explaining the value premium, but only some of the time and for some of the stocks.