Bridge over ocean
1 November 2003 Financial Analysts Journal Volume 59, Issue 6

Capturing the Value Premium in the United Kingdom

  1. Elroy Dimson, FSIP, PhD
  2. Stefan Nagel
  3. Garrett Quigley

Using a new data set of accounting information merged with share price data, we found a strong value premium in the United Kingdom for the period 1955–2001. It existed among small-capitalization and large-capitalization stocks. But small-cap stock managers who wish to capture the higher expected returns face some challenges. We show that rebalancing-induced portfolio turnover for indexed small-cap value strategies can be substantial. Coupled with the relative illiquidity of the U.K. market for small-cap value stocks, such high turnover calls for strategies that sacrifice tracking accuracy in favor of reducing trading needs and lowering trading costs.

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