Citation

Discussion Paper Details

Please find the details for DP12685 in an easy to copy and paste format below:

Full Details

Title: Deep Value

Author(s): Clifford S. Asness, John M. Liew, Lasse Heje Pedersen and Ashwin K Thapar

Publication Date: February 2018

Keyword(s): arbitrage, behavioral finance, bubbles, demand pressure, Market Efficiency, noise, over-reaction and value investing

Programme Area(s): Financial Economics

Abstract: We define "deep value" as episodes where the valuation spread between cheap and expensive securities is wide relative to its history. Examining deep value across global individual equities, equity index futures, currencies, and global bonds provides new evidence on competing theories for the value premium. Following these episodes, the value strategy has (1) high average returns; (2) low market betas, but high betas to a global value factor; (3) deteriorating fundamentals; (4) negative news sentiment; (5) selling pressure; (6) increased limits to arbitrage; and (7) increased arbitrage activity. Lastly, we find that deep value episodes tend to cluster and a deep value trading strategy generates excess returns not explained by traditional risk factors.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=12685

Bibliographic Reference

Asness, C, Liew, J, Pedersen, L and Thapar, A. 2018. 'Deep Value'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=12685