An evolutionary explanation of the value premium puzzle

As early as 1934 Graham and Dodd conjectured that excess returns from value investment originate from a tendency of stock prices to converge towards a fundamental value. This paper confirms their insights within the evolutionary finance model of Evstigneev et al. (Econ Theory 27:449–468, (Evstigneev...

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Bibliographic Details
Published inJournal of evolutionary economics Vol. 21; no. 5; pp. 803 - 815
Main Authors Hens, Thorsten, Lensberg, Terje, Schenk-Hoppé, Klaus Reiner, Wöhrmann, Peter
Format Journal Article
LanguageEnglish
Published Berlin/Heidelberg Springer-Verlag 01.12.2011
Springer Nature B.V
Subjects
Asset pricing
Capital assets
Dow Jones averages
Economic Growth
Economic theory
Economic Theory/Quantitative Economics/Mathematical Methods
Economics
Economics and Finance
Entrepreneurship
Equilibrium
Evolutionary economics
Financial analysis
Financial information
Hypotheses
Institutional/Evolutionary Economics
Investments
Mathematical finance
Microeconomics
Prices
R & D/Technology Policy
Regular Article
Return on investment
Securities markets
Stock exchange
Stock exchanges
Stock prices
Stock returns
Studies
United States > US
G12
Value premium
Evolutionary finance
D53
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Summary:As early as 1934 Graham and Dodd conjectured that excess returns from value investment originate from a tendency of stock prices to converge towards a fundamental value. This paper confirms their insights within the evolutionary finance model of Evstigneev et al. (Econ Theory 27:449–468, (Evstigneev et al. 2006 )). Our empirical results show the predictive power of the evolutionary benchmark valuation for the relative market capitalization and its dynamics in the sample of firms listed in the Dow Jones Industrial Average index in 1981–2009.
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 23
ISSN:0936-9937
1432-1386
DOI:10.1007/s00191-010-0213-1