One such series of studies [Fama and French (1992, 1993, 1996), Lakonishok, Shleifer, and Vishny (1994), Chan, Jegadeesh, and Lakonishok (1995), La Porta, kakonishok, Shleifer, and Vishny (1997), Kothari and Shanken (1997), Arshanapalli, Coggin, and Doukas (1998), Pontiff and Schall (1998), Doukas, Kim, and Pantzalis (2002) and Zhang (2005)] has focused upon explanations for the premium earned by high book-to-market value stocks relative to glamour stocks. The interpretation of, and explanations for, why value-strategies outperform growth-strategies remain unsettled.
(3) While not disputing the conclusion, Lakonishok, Shleifer, and Vishny (1994) attribute the superior returns of value strategies to a consistent overestimation by investors of future growth rates of glamour stocks relative to value stocks.
Lakonishok, "'Evaluating the Performance of Value versus Glamour Stocks: The Impact of Selection Bias," Journal of Financial Economics, 38, no.
On the other hand, investors are overly optimistic about glamour stocks and have higher expectations of future growth because these firms had strong earnings and growth in the past.
Thus, SG1 contains stocks with lowest past sales growth (value stocks), SG2 has stocks in quintiles 2, 3, and 4 of sales growth, and SG3 comprises firms with the highest past sales growth (glamour stocks).
Moreover, a conditional accruals strategy that excludes glamour stocks (B/M1) from low-accruals portfolio (Acc1) is more profitable than a plain vanilla accruals strategy.
ABSTRACT: We investigate whether the accruals anomaly is a manifestation of the glamour stock phenomenon documented in the finance literature.