Abstract

Fama and French (2012) … nd no signi…cant global value premium among large stocks. Two simple departures from their methodology restore such premium: sorting stocks on price-to-earnings rather than price-to-book ratios, and using global rather than regional value break-points. Using price-to-earnings computed from earnings estimates rather than historical earn-ings further sharpens the global value e¤ect among large stocks. Not con…ned to small stocks, the value premium remains a highly economically signi…cant phenomenon. Because valuation ratios are not interchangeable, researchers should consider looking beyond price-to-book when studying, or controlling for, the value e¤ect.