This paper examines the risk premium of value stocks within a global investment strategy framework. We test whether absolute or relative mispricing is better suited to capturing the global value premium by using fair valuebased net asset values (NAVs) as our proxies for fundamental value. We find that investing in the most underpriced stocks relative to the average ratio of price to fundamental value in a country is the key to achieving superior risk-adjusted returns. The annualized excess return of the global value portfolio sorted according to relative mispricing is 10.0%, and remains significant after controlling for common risk factors.

This paper analyzes the return sensitivities of real estate value and growth stocks to changes in five different interest rate proxies. Using a global sample of 352 listed real estate companies from 12 countries as a test object, we find that real estate value stocks are more sensitive than real estate growth stocks to changes in the short-term interest rate. This finding is consistent with the theory that investors with shorter investment horizons trade off the high initial yield of value stocks against lower-risk shortterm interest rates. In contrast, real estate growth stocks are more sensitive to changes in the long-term interest rate, which is consistent with a stronger impact on the present value of the future cash flows of growth stocks. We also find that real estate value stocks are more sensitive to changes in the credit yield.Because credit costs have a direct impact on a firm's cost of capital, this result is consistent with riskbased theories of the value premium, which argue value stocks are riskier because they tend to have higher leverage and greater default probability.

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This paper analyzes the return sensitivity of value and growth stocks to changes of five interest rate proxies. The analysis is based on monthly data over the 2000 to 2014 period for a global sample of 487 listed real estate companies in 24 countries. This rich setting offers substantial heterogeneity in interest rates across time and countries. We find that value stocks are more sensitive to changes in the short-term rate than growth stocks. This is consistent with the theory that investors with a short investment horizon trade-off the high initial yield of value stocks against a lower risk short-term rate. In contrast, growth stocks are more sensitive to changes in the long-term rate, which is consistent with the future cash flows of growth stocks being discounted at a higher rate. We also find that value stocks are more sensitive to changes in the credit yield. Since credit costs have a direct impact on a firm's cost of capital, this result is consistent with risk-based theories of the value premium, which argue that value stocks are riskier, because they tend to have higher leverage and a larger default probability.2

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