Beukes, Anna; Faure, A. Pierre
April 2014
Asia Pacific Journal of Medical Toxicology;Spring2014, Vol. 26 Issue 1, p131
Academic Journal
The value premium refers to the superior share price return of value companies compared to growth companies. This premium has been extensively tested internationally, including in South Africa. Based on the accumulation of empirical evidence the academic community has mostly come to agree that value investment strategies, on average, outperform growth investment strategies. There is less agreement about how to explain the persistence of the value premium. This paper discusses various explanations and empirically tests extrapolation -- the tendency to project recent experience into the future -- as a potential explanation for the value premium and finds strong empirical evidence to support it.


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