||Does mispricing drive the value eﬀect? Evidence from Japan
Shiomi, Naoya ,
Takahashi, HidetomoXu, Peng
13 , 2016-02-29 , Institute of Comparative Economic Studies, Hosei University
This paper shows that the residual book-to-market, which is free of the eﬀects of investment factors and distress risk, can predict future stock appreciation. In addition, we find that the tendency is stronger among stocks with higher idiosyncratic volatility and lower investor sophistication. Our findings indicate that mispricing is the main driver of the value eﬀect.