Value Uncertainty

Bali, Turan G.; Del Viva, Luca; Hefnawy, Menatalla El; Trigeorgis, Lenos

doi:10.1287/mnsc.2023.4888

Value Uncertainty

Bali, Turan G.; Del Viva, Luca; Hefnawy, Menatalla El; Trigeorgis, Lenos

Authors

Turan G. Bali

Luca Del Viva

Menatalla El Hefnawy

Professor Lenos Trigeorgis lenos.trigeorgis@durham.ac.uk
Professor

Abstract

We examine how time-series volatility of book-to-market (UNC) is priced in equity returns and the relative contributions of its book volatility (variations in earnings and book value) and market volatility components (shocks in required return). UNC captures valuation risk, so stocks with high valuation risk earn higher return. An investment strategy long in high-UNC and short in low-UNC firms generates 8.5% annual risk-adjusted return. UNC valuation risk premium is driven by outperformance of high-UNC firms facing higher information risk and is not explained by established risk factors and firm characteristics.

Citation

Bali, T. G., Del Viva, L., Hefnawy, M. E., & Trigeorgis, L. (2023). Value Uncertainty. Management Science, https://doi.org/10.1287/mnsc.2023.4888

Journal Article Type	Article
Acceptance Date	Nov 20, 2022
Online Publication Date	Sep 14, 2023
Publication Date	2023
Deposit Date	Feb 6, 2023
Publicly Available Date	Feb 6, 2023
Journal	Management Science
Print ISSN	0025-1909
Electronic ISSN	1526-5501
Publisher	Institute for Operations Research and Management Sciences
Peer Reviewed	Peer Reviewed
DOI	https://doi.org/10.1287/mnsc.2023.4888
Public URL	https://durham-repository.worktribe.com/output/1183719