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Style timing with the value spread in Australia

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  • Charles E. Hyde
  • David Beggs

Abstract

The value spread is shown to be positively related to the value premium in the Australian market. The relationship is especially strong for small cap portfolios and typically stronger when using the book‐to‐price ratio than other value metrics. In small cap portfolios, the positive value premium–spread relationship is primarily driven by the short side. Our results are consistent with previous findings in US and Asian markets. We also show that the small cap–large cap value spread differential is positively related to the corresponding value premium differential, suggesting the value spread can also be used for timing the large/small cap tilt.

Suggested Citation

  • Charles E. Hyde & David Beggs, 2009. "Style timing with the value spread in Australia," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 49(4), pages 781-798, December.
    • Handle: RePEc:bla:acctfi:v:49:y:2009:i:4:p:781-798
    DOI: 10.1111/j.1467-629X.2009.00303.x
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    File URL: https://doi.org/10.1111/j.1467-629X.2009.00303.x
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    References listed on IDEAS

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    5. Fama, Eugene F & French, Kenneth R, 1988. "Permanent and Temporary Components of Stock Prices," Journal of Political Economy, University of Chicago Press, vol. 96(2), pages 246-273, April.
    6. Chen, Long & Petkova, Ralitsa & Zhang, Lu, 2008. "The expected value premium," Journal of Financial Economics, Elsevier, vol. 87(2), pages 269-280, February.
    7. Clive Gaunt, 2004. "Size and book to market effects and the Fama French three factor asset pricing model: evidence from the Australian stockmarket," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 44(1), pages 27-44, March.
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    1. Chung, Yi-Tsai & Hsu, Chuan-Hao & Ke, Mei-Chu & Liao, Tung Liang & Chiang, Yi-Chein, 2016. "The weakening value premium in the Australian and New Zealand stock markets," Pacific-Basin Finance Journal, Elsevier, vol. 36(C), pages 123-133.

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