00Thaler_FM i-xxvi.qxd

Table

8.6

Y

ear-by-Year Returns: Value–Glamour

Panel 1: At the end of each April between 1968 and 1989, 10-decile portfolios are formed based on the ratio of previous-year’s

cash

flow to end-of-April market-value of equity (C/P). For each portfolio, 1-, 3-, and 5-year holding-period returns are computed. F

or each

formation period, Panel 1 reports the difference in the 1-, 3-, and 5-year return between the 2 highest C/P (value) and 2 lowes

t C/P (glam-

our) portfolios.

Panel 2: At the end of each April between 1968 and 1989, 9 groups of stocks are formed as follows. All stocks are independently

sorted into 3 groups ((1) bottom 30 percent, (2) middle 40 percent, and (3) top 30 percent) by the ratio of previous-year’s cas

h flow to

end-of-April market-value of equity (C/P) and by the preformation 5-year weighted average rank-of-sales growth (GS). The 9 port

folios

are intersections resulting from these 2 independent classifications. For each portfolio, 1-, 3-, and 5-year holding period retu

rns are com-

puted. For each formation period, Panel 2 reports the difference in the 1-, 3-, and 5-year return between the lowest GS, highes

t C/P

(value) and the highest GS, lowest C/P (glamour) portfolios.

Panel 3: At the end of each April between 1968 and 1989, 10-decile portfolios are formed based on the ratio of the end-of-previ

ous-

year’s book value of equity to end-of-April market value of equity (B/M). For each portfolio, 1-, 3-, and 5-year-holding-period

returns

are computed. For each formation period, Panel 3 reports the difference in the 1-, 3-, and 5-year return between the highest B/

M (value)

and lowest B/M (glamour) decile portfolios.

The last two rows respectively report the arithmetic mean across periods and the

t-statistic for the test of the hypothesis that the dif-

ference in returns between value and glamour is equal to zero. These

t-statistics are based on standard errors computed according to

Hansen and Hodrick (1980).

Panel 1

Panel 2

Panel 3

(C/P:9, 10 – 1, 2)

(C/P-GS:3, 1 – 1, 3)

(B/M:9, 10 – 1, 2)

1-Year

3-Year

5-Year

1-Year

3-Year

5-Year

1-Year

3-Year

5-Year

1968

0.022

0.287

0.474

0.144

0.153

0.267

0.098

0.201

0.344

1969

0.123

0.195

0.410

0.065

−0.143

0.283

0.074

0.070

0.303

1970

0.135

0.246

0.428

0.002

0.160

0.356

0.023

0.032

0.279

1971

−0.078

0.231

0.478

−0.144

0.196

0.531

−0.108

0.156

0.463

1972

0.155

0.319

0.693

0.134

0.362

0.932

0.098

0.328

0.784