The return to value in Asian stock markets Stephen Brown a, 1 , S. Ghon Rhee b,c, ⁎, Liang Zhang d,2 a NYU Stern School of Business and MIR, 44 West 4th Street KMEC 9-190, New York NY 10012 b University of Hawaii Shidler College of Business, 2404 Maile Way (#C-304), Honolulu, HI 96822 c Sungkyunkwan University Business School of Seoul, Korea d University of Melbourne, Australia article info abstract Article history: Received 27 December 2007 Received in revised form 19 May 2008 Accepted 22 May 2008 Available online 5 June 2008 This paper investigates the returns to value strategies in four Asian stock markets: Hong Kong, Korea, Singapore and Taiwan. Hong Kong, Korea and Singapore exhibit value premia while Taiwan shows value discounts. The impact of firm characteristics on value premia differs across the four markets. The robustness tests indicate that the value premia are time-varying. They become greater in the post-crisis period across all four countries, indicating that high volatility during the crisis period did understate the value premia. The value strategy's excess return is sensitive to the sample selection rule and the firm size and liquidity effects. With tighter sample selection criteria, value premia tend to decline, which indicates that both the firm size effect and the liquidity effect are important sources of value premia. Unequal weighting assigned to financial variables in constructing the Average Price Rank (APR) based on the overall performance of single-variable approach does not necessarily improve the results. © 2008 Elsevier B.V. All rights reserved. JEL Codes: G11 G12 G15 F21 Keywords: Value strategies Firm size effect Liquidity effect Asian stock markets Hong Kong Korea Singapore Taiwan 1. Introduction Value strategies (buying stocks that have low prices relative to earnings, dividends, historical prices, book assets, or cash flow, and other measures of intrinsic value) have been studied extensively using U.S. market data. Lakonishok et al. (1994) and Fama and French (1992, 1996) report that value strategies yield high returns. Chan et al. (1995) suggest that the difference in the returns of value (high book-to-market Emerging Markets Review 9 (2008) 194–205 ⁎ Corresponding author. University of Hawaii Shidler College of Business, 2404 Maile Way (#C-304), Honolulu, HI 96822. Tel.: +1 808 956 2535. E-mail addresses: sbrown@stern.nyu.edu (S. Brown), rheesg@hawaii.edu (S. Ghon Rhee), zlmailbox@yahoo.com (L. Zhang). 1 Tel.: +1 212 998 0306. 2 Tel.: +1 808 221 0645. 1566-0141/$ – see front matter © 2008 Elsevier B.V. All rights reserved. doi:10.1016/j.ememar.2008.05.002 Contents lists available at ScienceDirect Emerging Markets Review journal homepage: www.elsevier.com/locate/emr