What Exactly Is the Value Premium? – CBS MoneyWatch.com
The existence of a value premium — the difference in returns between high book-to-market stocks and low book-to-market stocks — has been well documented. However, there’s controversy as to its source. Some believe it’s a risk story — value stocks are the stocks of riskier companies. Behavioralists believe it results from pricing mistakes — investors persistently overprice growth stocks and underprice value stocks.