{"id":638,"date":"2015-11-19T15:02:51","date_gmt":"2015-11-19T15:02:51","guid":{"rendered":"http:\/\/quantpedia.com\/?p=638"},"modified":"2025-06-04T14:07:40","modified_gmt":"2025-06-04T12:07:40","slug":"time-varying-conditional-market-exposures-of-the-value-premium","status":"publish","type":"post","link":"https:\/\/vvv.quantpedia.com\/es\/time-varying-conditional-market-exposures-of-the-value-premium\/","title":{"rendered":"Time-Varying Conditional Market Exposures of the Value Premium"},"content":{"rendered":"

\n\t#26 – Value (Book-to-Market) Anomaly<\/a><\/strong><\/p>\n

\n\tAuthors: Qiao<\/strong><\/p>\n

\n\tTitle: Conditional Market Exposures of the Value Premium<\/strong><\/p>\n

\n\tLink: http:\/\/papers.ssrn.com\/sol3\/papers.cfm?abstract_id=2687528<\/a><\/p>\n

\n\tAbstract:
\n\t
\n\tValue strategies exhibit a large positive beta if contemporaneous market excess returns are positive, and a small beta if contemporaneous market excess returns are negative. Value also has a large positive beta after bear markets, but a small beta after bull markets. These facts hold for equity-value strategies in 21 countries, and to a lesser extent for three non-equity-value strategies. Betas conditional on contemporaneous market returns are able to capture expected return variation associated with the book-to-market ratio. These betas partially explain the value premium, and are related to a larger cash-flow risk of value strategies.<\/font><\/p>\n

\n\tNotable quotations from the academic research paper:<\/p>\n

\n\t"Value strategies exhibit asymmetric betas: a large and positive up-market beta when the contemporaneous market excess returns are positive, and a small or negative down-market beta when the contemporaneous market excess returns are zero or negative. Value strategies also exhibit time-varying betas: after a string of good market returns, or a bull market, value has a small negative bull-market beta. After a string of poor market returns, value has a large positive bear-market beta. Asymmetric betas and time-varying betas also exist for international equity-value strategies, and to a lesser extent, in three non-equity-value strategies.<\/p>\n

\n\tAsymmetric betas and time-varying betas are plausibly linked through mean-reversion of market returns. Value has a large positive beta in bear markets when market returns have been low. Because market returns tend to mean-revert, expected market returns are high when realized returns have been low. Therefore, value has a large positive beta when expected market returns are high. Value also has a small negative beta when expected market returns are low. Taken together, the time-varying betas combined with mean-reverting market returns translate into asymmetric contemporaneous betas.<\/p>\n

\n\tConditional market exposures shed light on the mechanism of value strategies. A decomposition of beta into its cash-flow and discount-rate components reveals asymmetric betas mostly come from cash-flow betas, consistent with the idea that value securities have higher cash-flow risk."<\/p>\n\n

\n\n\n\n

Are you looking for more strategies to read about? Sign up for our newsletter<\/a> or visit our Blog<\/a> or Screener<\/a><\/strong>.<\/p>\n\n\n\n

Do you want to learn more about Quantpedia Premium service? Check how Quantpedia works<\/a>, our mission<\/a> and Premium pricing offer<\/a>.<\/strong><\/p>\n\n\n\n

Do you want to learn more about Quantpedia Pro service? Check its description<\/a>, watch videos<\/a>, review reporting capabilities<\/a> and visit our pricing offer<\/a>.<\/strong><\/p>\n\n\n\n

Are you looking for historical data or backtesting platforms? Check our list of Algo Trading Discounts<\/a><\/strong>.<\/p>\n\n\n\n

Would you like free access to our services<\/a>? Then, open an account with Lightspeed<\/a> and enjoy one year of Quantpedia Premium at no cost.<\/strong><\/p>\n\n\n\n

\n\n\n\n

Or follow us on:<\/strong><\/p>\n\n\n\n

Facebook Group<\/a>, Facebook Page<\/a>, Twitter<\/a>, Linkedin<\/a>, Medium<\/a> or Youtube<\/a><\/strong><\/p>","protected":false},"excerpt":{"rendered":"

\n\t#26 – Value (Book-to-Market) Anomaly<\/a><\/strong><\/p>\n

\n\tAuthors: Qiao<\/strong><\/p>\n

\n\tTitle: Conditional Market Exposures of the Value Premium<\/strong><\/p>\n

\n\tLink: http:\/\/papers.ssrn.com\/sol3\/papers.cfm?abstract_id=2687528<\/a><\/p>\n

\n\tAbstract:<\/p>\n

\tValue strategies exhibit a large positive beta if contemporaneous market excess returns are positive, and a small beta if contemporaneous market excess returns are negative. Value also has a large positive beta after bear markets, but a small beta after bull markets. These facts hold for equity-value strategies in 21 countries, and to a lesser extent for three non-equity-value strategies. Betas conditional on contemporaneous market returns are able to capture expected return variation associated with the book-to-market ratio. These betas partially explain the value premium, and are related to a larger cash-flow risk of value strategies.<\/font><\/p>\n

\n\tNotable quotations from the academic research paper:<\/p>\n

\n\t"Value strategies exhibit asymmetric betas: a large and positive up-market beta when the contemporaneous market excess returns are positive, and a small or negative down-market beta when the contemporaneous market excess returns are zero or negative. Value strategies also exhibit time-varying betas: after a string of good market returns, or a bull market, value has a small negative bull-market beta. After a string of poor market returns, value has a large positive bear-market beta. Asymmetric betas and time-varying betas also exist for international equity-value strategies, and to a lesser extent, in three non-equity-value strategies.<\/p>\n

\n\tAsymmetric betas and time-varying betas are plausibly linked through mean-reversion of market returns. Value has a large positive beta in bear markets when market returns have been low. Because market returns tend to mean-revert, expected market returns are high when realized returns have been low. Therefore, value has a large positive beta when expected market returns are high. Value also has a small negative beta when expected market returns are low. Taken together, the time-varying betas combined with mean-reverting market returns translate into asymmetric contemporaneous betas.<\/p>\n

\n\tConditional market exposures shed light on the mechanism of value strategies. A decomposition of beta into its cash-flow and discount-rate components reveals asymmetric betas mostly come from cash-flow betas, consistent with the idea that value securities have higher cash-flow risk."<\/p>\n

\n

\n\tAre you looking for more strategies to read about? Check http:\/\/\\\/\\\/new-fmhwbzh6ghd9hede.swedencentral-01.azurewebsites.net\/Screener<\/a><\/strong><\/p>\n

\n\tDo you want to see performance of trading systems we described? Check<\/strong> http:\/\/\\\/\\\/new-fmhwbzh6ghd9hede.swedencentral-01.azurewebsites.net\/Chart\/Performance<\/a><\/strong><\/p>\n

\n\tDo you want to know more about us? Check<\/strong> http:\/\/\\\/\\\/new-fmhwbzh6ghd9hede.swedencentral-01.azurewebsites.net\/Home\/About<\/a><\/strong><\/p>","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-638","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/vvv.quantpedia.com\/es\/wp-json\/wp\/v2\/posts\/638","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vvv.quantpedia.com\/es\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vvv.quantpedia.com\/es\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vvv.quantpedia.com\/es\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/vvv.quantpedia.com\/es\/wp-json\/wp\/v2\/comments?post=638"}],"version-history":[{"count":0,"href":"https:\/\/vvv.quantpedia.com\/es\/wp-json\/wp\/v2\/posts\/638\/revisions"}],"wp:attachment":[{"href":"https:\/\/vvv.quantpedia.com\/es\/wp-json\/wp\/v2\/media?parent=638"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vvv.quantpedia.com\/es\/wp-json\/wp\/v2\/categories?post=638"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vvv.quantpedia.com\/es\/wp-json\/wp\/v2\/tags?post=638"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}