Earlier this week, we examined a recent study contributing to the literature that supports a behavioral-based argument for the value premium, in particular that investors persistently overvalue the earnings prospects of growth (“glamour”) stocks.
The study—“Glamour, Value and Anchoring on the Changing P/E”—posits that the differing experiences of glamour and value investors could be explained by the well-documented behavioral bias of anchoring, specifically that investors may anchor on the price-to-earnings (P/E) ratio of a stock when they initially invest in it.
Read the rest of the article on ETF.com.