Market portfolio efficiency and value stocks

Thierry Post, Pirn Van Vliet

Research output: Contribution to journalArticle

Abstract

In this journal. Best, Best, and Yoder (2000) recently demonstrated that portfolios of U.S. value stocks dominate portfolios of U.S. growth stocks in terms of second-order stochastic dominance (SSD). We cannot conclude from this finding that the market is SSD inefficient, however, because market portfolio efficiency generally does not require growth portfolios to be efficient. Furthermore, stochastic dominance results are very sensitive to sampling error. In fact, the value-weighted market portfolio is not significantly inefficient, and no significant value effects exist in the sample of Best, Best, and Yoder.

Original languageEnglish
Pages (from-to)300-306
Number of pages7
JournalJournal of Economics and Finance
Volume28
Issue number3
DOIs
Publication statusPublished - Jan 1 2004

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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