The Value Premium on the Danish Stock Market: 1950-2008

A number of influential studies have documented a considerable value premium for US stocks over long periods of time. Value stocks, defined as companies that trade at low price-earnings or price-book values, are reported to have given a higher mean return than growth stocks trading at high multiples. Outside the US, there is also robust evidence of a value premium for the UK, but otherwise the evidence is more uncertain due to data shortages. Studies of continental European and Asian markets are, for example, based on data that typically only covers 20 years of market history. The purpose of this paper is to report evidence for the Danish market using a consistent data set that extends over the period 1950-2008. On the basis of these data the paper investigates whether the value premium is a stylized fact or just a phenomenon that pops up every few decades only to disappear again. The results show that the Danish value premium exists and is significant over the long run. However, this paper also shows that the premium is not a simple constant but is volatile even across decades.