What is the premium value?
The premium value is an attempt to quantify the difference between values and growth shares to allow the investor to make informed investment decisions. The concept of value bonus was developed in 1992 by economists K. G. French and Eugene Fam, although some critics claim that this is not a meaningful measure. Investors who use this calculation in their decision -making also tend to consider other factors and balance some information about future investments to make the best choice.
to find value bonuses, investors deal with the difference between value and growth shares. Value shares seem undervalued, with a high ratio of book to the market; Their actual accounting value is greater than their value, as traders evaluate in the open market. Growth shares have a low book ratio to the market, indicating that they sell more in the open market than their accounting value would indicate that it is worth it. Investors with Strategy Investment in Growth can find these valuablePapers with the aim of rapidly growing profit, while investors value buying the value of shares in the hope of earning them later.
The investor examines the difference between the upper and lower 30 securities as regards the ratio of the book to the market in the process of performing this calculation. The premium with a high value may indicate the possibility of significant profit potential by investing in value shares and holding them until their market value approaches their accounting value. Lower premiums may indicate that growth reserves could be a better purchase.
Critics of this approach to valuation of investment claim that the value of the bonus is more dependent on the measured period than at risk. The use of value bonuses does not have to help people avoid risk, depending on when they do the calculation because the stock market is moving regularly and these shifts are not reliable or predictable.To provide instructions for people who are interested in determining the costs and benefits of the value versus growth investment.
Financial publications regularly provide evaluation of growth shares and value, sometimes with thorough discussions on specific shares that help lead investors. People can use these charts to determine the value of the premium. It may be useful to compare premiums at different time periods to find out how much fluctuations over time play into the value of the bonus and use further investment evaluation and advice on investment decisions.