Beta, Value, and Growth

34 Pages Posted: 11 Dec 2011 Last revised: 19 Mar 2021

Date Written: March 1, 2020


I propose a Capital Asset Pricing Model in which investor demand exhibits a speculative component. In equilibrium, investors' optimal trade-off between diversification and speculation generates predictable patterns for stocks with extreme book-to-market ratios. Consistent with the model predictions, I show that simple trading strategies on value and growth stocks yield positive and robust abnormal returns in the period from 1926 to 2017. The results are especially strong among stocks characterized by a large presence of naive investors, and during economic downturns. Overall, the findings shed new light on the economic meaning of the value premium.

Keywords: Value premium; Speculative demand; Beta; Business cycle.

JEL Classification: G11, G12, G14

Suggested Citation

Montone, Maurizio, Beta, Value, and Growth (March 1, 2020). Available at SSRN: or

Maurizio Montone (Contact Author)

Utrecht University ( email )

Kriekenpitplein 21-22
Adam Smith Building
Utrecht, +31 30 253 7373 3584 EC

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics