Download or read book Is the Value Spread a Useful Predictor of Returns? written by Naiping Liu and published by . This book was released on 2009 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: No. Two related variables, the book-to-market spread (the book-to-market of value stocks minus the book-to-market of growth stocks) and the market-to-book spread (the market-to-book of growth stocks minus the market-to-book of value stocks) predict returns but with opposite signs. The value spread mixes the cyclical variations of the book-to-market and market-to-book spreads, and appear much less useful in predicting returns. Our evidence casts doubt on recent studies that rely critically on using the value spread to predict aggregate stock returns.