Downside risk aversion, fixed-income exposure, and the value premium puzzle

Guido Baltussen, Gerrit T. Post, Pim Van Vliet

Research output: Contribution to journalArticlepeer-review

4 Citations (Scopus)


The value premium is relatively small for investors with a material fixed-income exposure, such as insurance companies and pension funds, especially when they are downside-risk-averse. Value stocks are less attractive to these investors because they offer a relatively poor hedge against poor bond returns. This result arises for plausible, medium-term evaluation horizons of around one year. Our findings cast doubt on the practical relevance of the value premium for these investors and reiterate the importance of the choice of the relevant test portfolio, risk measure and investment horizon in empirical tests of market portfolio efficiency.

Original languageEnglish
Pages (from-to)3382-3398
Number of pages17
JournalJournal of Banking and Finance
Issue number12
Publication statusPublished - Dec 2012


  • Asset pricing
  • Downside risk
  • Fixed income
  • Investment horizon
  • Value premium

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics


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