Haim Mozes Studies Value Risk Premium
Professor Haim Mozes has published “The Risk in Value,” in the April 2020 volume of Journal of Investing. This paper provides evidence consistent with the hypothesis that the value risk premium results, at least in part, from investors’ incremental forecast difficulty for value stocks. The evidence includes the findings that (1) analysts’ uncertainty about earnings is consistently higher and their earnings forecast accuracy is consistently lower for value stocks, (2) value returns are higher when relative forecast difficulty for value stocks is greater, and (3) trading volume is greater for value stocks. If the relative difficulty in forecasting earnings for value stocks is consistent over time, the value stock premium should also be fairly consistent over time. Indeed, using a more refined definition of value, he finds that the value stock return premium is far more consistent over time than is commonly believed and that it has been positive in recent years.