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Recent models of the value premium typically endogenously link B/M to firm-specific attributes. The value firms earn higher subsequent returns because these firms command a higher risk premium due to a higher default probability, lower profitability, higher operating leverage, shorter cash flow duration, or higher cash flow risk. In this paper, we first sort the entire sample into several groups of firms based on different levels of limits to arbitrage, across which the value premium varies substantially. We find that among the low limits-to-arbitrage groups in which the value premium is relatively small, there is indeed a significant desired relation between B/M and firm-specific attributes. In sharp contrast, among the high limits-to-arbitrage groups in which the value premium is the most pronounced, there is no significant desired relation between B/M and firm-specific attributes. These results are robust to exclusion of small stocks. Our findings suggest that risk may play a role in the value premium only among the low limits-to-arbitrage group, whereas mispricing plays a significant role among the high limits-to-arbitrage group.