An investigation of the value anomaly in the UK stock market 1987-2000
By: Panagiotis Andrikopoulos.
Publisher: University of Portsmouth
Published: 2002
Place of publication: Portsmouth
Language: eng
Description: This study investigates the existence of the value premium in the UK stock market for the period 1987–2000. The examination is carried out using a new bias-free database, Strategic Equity Analysis (S.E.A.), that covers all officially listed companies. 
The research finds little evidence of a value premium for the period 1987-2000. Apart from the case where stocks are classified on the basis of past sales growth, the results are economically and statistically insignificant.
These findings contradict previous studies of the value effect in the UK market. Possible explanations include the effect of the internet bubble of the late 1990s, the restriction of the present study to officially listed stocks, the relative shortness of time period examined in this study, and the biases in earlier research caused by omissions and errors in the data sets used. 
The study is replicated for the period 1987-1998, excluding the most extreme years of the internet bubble 1999 and 2000. For this period a strong value premium is found for all classifications, while size-adjusted returns point to a powerful small-size premium. 
The results of the classification tests are supported by a series of regression analyses, which examine the explanatory power of the variables used. The regression analysis shows that past sales growth significantly explains returns one year after portfolio formation, while SIZE is the only factor that consistently explains stock returns throughout the entire post-formation period. 
Using standard risk measures such as beta and standard deviation of returns, value appears to be riskier than growth. Nevertheless, similar to Lakonishok et. al. (1994) the risk difference is too small to explain returns’ differences.
Notes: Thesis (Ph.D.) - University of Portsmouth, 2002.
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