Good News for Value Stocks: Further Evidence on Market Efficiency


LaPorta, Rafael, Florencio Lopez-de-Silanes, Andrei Shleifer, and Robert W Vishny. 1995. “Good News for Value Stocks: Further Evidence on Market Efficiency”. Copy at


This paper examines the hypothesis that the superior return to so–called value stocks is the result of expectational errors made by investors. We study stock price reactions around earnings announcements for value and glamour stocks over a 5 year period after portfolio formation. The announcemen returns suggest that a significant portion of the return difference between value and glamour stocks is attributable to earnings surprises that are systematically more positive for value stocks. The evidence is inconsistent with a risk–based explanation for the return differential.


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