X-Message-Number: 9916 Date: Sat, 20 Jun 1998 00:49:29 -0700 (PDT) From: Doug Skrecky <> Subject: multifactor explanations of asset pricing anomalies The Journal of Finance LI(1): 55-84 1996 Eugene F. Fama and kenneth R. French "Multifactor Explanations of Asset Pricing Anomalies" Abstract: Previous work shows that average return on common stocks are related to firm characteristics like size, earnings/price, cash flow/price, book-to-market equity, past sales growth, long-term past return, and short-term past return. Because these patterns in average returns apparently are not explained by the CAPM, they are called anomalies. We find that, except for the continuation of short-term returns, the anomalies largely disappear in a three-factor model. Our results are consistent with rational ICAPM or APT asset pricing, but we also consider irrational pricing and data problems as possible explanations. Additional quote from text: Thus portfolios formed on E/P, C/P, sales growth, and long-term past returns do not uncover dimensions of risk and expected return beyond those required to explain the returns on portfolios formed on size and BE/ME. Rate This Message: http://www.cryonet.org/cgi-bin/rate.cgi?msg=9916