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Is the Value Premium Dead? Forecasting Value–Growth Cycles with the Implied Value Premium

Yan Li et al.

Journal of Financial and Quantitative Analysis2026https://doi.org/10.1017/s0022109026102609article
FT50AJG 4ABDC A*
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0.50

Abstract

We introduce the implied value premium ( IVP ), the difference between the implied costs of capital of value and growth stocks, to predict time variation in the ex post value premium. During 1977–2023, IVP is the strongest predictor of the ex post value premium. It also predicts the investment premium, consistent with the Investment CAPM. However, IVP ’s ability to predict the difference in cumulative abnormal returns around quarterly earnings announcements of value and growth stocks suggests that mispricing may also play a role. Overall, our results suggest that recent value underperformance reflects cyclical variation rather than a permanent shift.

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https://doi.org/https://doi.org/10.1017/s0022109026102609

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@article{yan2026,
  title        = {{Is the Value Premium Dead? Forecasting Value–Growth Cycles with the Implied Value Premium}},
  author       = {Yan Li et al.},
  journal      = {Journal of Financial and Quantitative Analysis},
  year         = {2026},
  doi          = {https://doi.org/https://doi.org/10.1017/s0022109026102609},
}

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Is the Value Premium Dead? Forecasting Value–Growth Cycles with the Implied Value Premium

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F · citation impact0.50 × 0.4 = 0.20
M · momentum0.50 × 0.15 = 0.07
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R · text relevance †0.50 × 0.4 = 0.20

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