Value stocks may provide investors with better returns than growth stocks if:
I. Value stocks are out of favor with investors.
II. Prices of growth stocks include premiums for overly optimistic growth levels.
III. Value stocks are likely to generate positive-earnings surprises.
A) I only
B) II only
C) I and III only
D) I, II, and III

Question

Quizplus · Accepted Answer

Value stocks may provide better returns than growth stocks if they are currently out of favor (I), implying potential for revaluation; if growth stocks are overpriced due to overly optimistic expectations (II), suggesting they might underperform if those expectations are not met; and if value stocks are likely to generate positive earnings surprises (III), which could lead to upward price adjustments as the market reacts to the new information.

Value Stocks May Provide Investors with Better Returns Than Growth