2008•Financial Analysts JournalRequires access

Where Is the Value Premium?

Ludovic Phalippou

Abstract

The value premium is driven by 7 percent of the stock market. The 93 percent of market capitalization held most by institutional investors is value premium free. In contrast, in stocks held most by individual investors, the value premium, even when the stocks are value weighted, reaches a staggering 185 bps per month. In addition, the value premium is a long-side anomaly. It is a value premium puzzle, not a growth discount puzzle.

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Key concepts: Value premium, Growth stock, Value (mathematics), Economics, Equity premium puzzle, Market capitalization, Capitalization, Liquidity premium