Capturing the Value Premium - Global Evidence from a Fair Value-Based Investment Strategy

Posted: 15 Sep 2020

See all articles by René-Ojas Woltering

René-Ojas Woltering

University of Regensburg - International Real Estate Business School (IREBS)

Christian Weis

University of Regensburg

Felix Schindler

Steinbeis University Berlin - Center for Real Estate Studies; ZEW – Leibniz Centre for European Economic Research - International Finance and Financial Management

Steffen P. Sebastian

University of Regensburg - International Real Estate Business School (IREBS)

Date Written: January 1, 2018

Abstract

This paper examines the risk premium of value stocks within a global investment strategy framework. We test whether absolute or relative mis-pricing is better suited to capturing the global value premium by using fair value-based net asset values (NAVs) as our proxies for fundamental value. We find that investing in the most under-priced stocks relative to the average ratio of price to fundamental value in a country is the key to achieving superior risk-adjusted returns. The annualized excess return of the global value portfolio sorted according to relative mis-pricing is 10.0%, and remains significant after controlling for common risk factors.

Keywords: Global Diversification, Investment Strategy, Net Asset Value Value Premium

Suggested Citation

Woltering, René-Ojas and Weis, Christian and Schindler, Felix and Sebastian, Steffen P., Capturing the Value Premium - Global Evidence from a Fair Value-Based Investment Strategy (January 1, 2018). Journal of Banking and Finance, Vol. 86, 2018, Available at SSRN: https://ssrn.com/abstract=3661360

René-Ojas Woltering

University of Regensburg - International Real Estate Business School (IREBS) ( email )

Universitaetsstrasse 31
Regenburg, Bavaria 93040
Germany

Christian Weis

University of Regensburg

93040 Regensburg
D-93040 Regensburg, 93053
Germany

Felix Schindler

Steinbeis University Berlin - Center for Real Estate Studies ( email )

Berlin
Germany

ZEW – Leibniz Centre for European Economic Research - International Finance and Financial Management ( email )

Postfach 103443
Mannheim, D-68034
Germany

Steffen P. Sebastian (Contact Author)

University of Regensburg - International Real Estate Business School (IREBS) ( email )

Universitaetsstrasse 31
Regenburg, Bavaria 93040
Germany
+49(941)943-5081 (Phone)
+49(941)943-5082 (Fax)

HOME PAGE: http://www.irebs.de

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