Studies by Chan, Karceski, and Lakonishok (2003) and La Porta, Lakonishok, Shleifer, and Vishny (1997) report that
A) the value premium is a manifestation of market irrationality.
B) the value premium is a rational risk premia.
C) the value premium is a statistical artifact found only in the U.S.
D) All of the options are correct.
E) None of the options are correct.

Question

Quizplus · Accepted Answer

The studies suggest that the value premium is a result of market irrationality, where investors overreact to information, leading to mispricing that value stocks can exploit.