Journal of Evolutionary Economics

, Volume 21, Issue 5, pp 803–815 | Cite as

An evolutionary explanation of the value premium puzzle

  • Thorsten Hens
  • Terje Lensberg
  • Klaus Reiner Schenk-Hoppé
  • Peter Wöhrmann
Regular Article


As early as 1934 Graham and Dodd conjectured that excess returns from value investment originate from a tendency of stock prices to converge towards a fundamental value. This paper confirms their insights within the evolutionary finance model of Evstigneev et al. (Econ Theory 27:449–468, (Evstigneev et al. 2006)). Our empirical results show the predictive power of the evolutionary benchmark valuation for the relative market capitalization and its dynamics in the sample of firms listed in the Dow Jones Industrial Average index in 1981–2009.


Value premium Evolutionary finance 

JEL Classification

G12 D53 



Financial support by the National Centre of Competence in Research “Financial Valuation and Risk Management” is gratefully acknowledged. Terje Lensberg and Klaus Reiner Schenk-Hoppé also thank the Norwegian Finance Market Fund for financial support (project “Stability of Financial Markets: An Evolutionary Approach”).


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Copyright information

© Springer-Verlag 2010

Authors and Affiliations

  • Thorsten Hens
    • 1
  • Terje Lensberg
    • 2
  • Klaus Reiner Schenk-Hoppé
    • 3
  • Peter Wöhrmann
    • 4
  1. 1.Swiss Banking InstituteUniversity of ZurichZürichSwitzerland
  2. 2.Department of Finance and Management ScienceNorwegian School of Economics and Business AdministrationBergenNorway
  3. 3.Leeds University Business School and School of MathematicsUniversity of LeedsLeedsUK
  4. 4.Swiss Federal Institute of Technology ZurichZürichSwitzerland

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