Value versus glamour

Kaul, Gautam; Cooper, Michael; Conrad, Jennifer

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Value versus glamour

Conrad, Jennifer; Cooper, Michael; Kaul, Gautam

Cite this item: Conrad, J., Cooper, M., & Kaul, G. (2003, March 7). Value versus glamour. University of Otago Department of Finance Seminar Series. Presented at the University of Otago, Finance department, Seminar.

Permanent link to OUR Archive version: http://hdl.handle.net/10523/1528

Date: 2003-03-07

Pages: 58

Conference: University of Otago, Finance department, Seminar, Commerce 207, University of Otago, Dunedin, Otago

Keywords: CAPM; trading strategies; equity returns; profits; data-snooping

Research Type: Conference or Workshop Item (Seminar, Speech or Other Presentation)

Abstract:

The fragility of the CAPM has led to a resurgence of research that frequently uses trading strategies based on sorting procedures to uncover relations between firm characteristics (such as “value” or “glamour”) and equity returns. We examine the propensity of these strategies to generate statistically and economically significant profits due to our familiarity with the data. Under plausible assumptions, data-snooping can account for up to 50 percent of the in-sample relations between firm characteristics and returns uncovered using single (one-way) sorts. The biases can be much larger if we simultaneously condition returns on two (or more) characteristics.

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