X-Message-Number: 9912
Date: Thu, 18 Jun 1998 11:29:12 -0700 (PDT)
From: Doug Skrecky <>
Subject: cross-section of expected stock returns

The Journal of Finance XLVII(2): 427-465  June 1992

 Eugene F. Fama and Kenneth R. French

"The Cross-Section of Expected Stock Returns"

Abstract:

    Two easily measured variables, size and book-to-market equity, combine
to capture the cross-sectional variation in average stock returns
associated with market beta, size, leverage, book-to-market equity, and
earnings-price ratios. Moreover, when the tests allow for variation in beta
that is unrelated to size, the relation between market beta and average
return is flat, even when beta is the only explanatory variable.

Additional note by poster:

   The above financial research report is the one that is most quoted , and
has become quite famous in certain circles. Since this report came out in
1992, subsequent research is begining to favour a role for beta (or
volitility) in returns, and the role of firm size has been deemphasized.
However no rational explanation has since been found for the association of
book-to-market to returns, although sales-to-price now looks to be
important as well.

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