The Value Line Enigma: The Sum of KnownParts?

Abstract

The investment advice encapsulated in the ValueLine Investment Survey's timelinessrankings is evaluated from 1965 to 1996 throughtime-series factor regressions, as well as bycomparing recommendations to benchmark portfolioscorresponding to their size, book-to-market, andmomentum characteristics. In addition,recommendations that have experienced recentearnings surprises are purged to eliminate theeffects of post-earnings announcement drift. Thereis evidence that Value Line recommendations exhibitperformance beyond what is predicted by existingmodels of expected return. However, oncetransactions costs have been accounted for, it isdoubtful profitable abnormal returns could have beenrealized.