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Seasonality, Size Premium and the Relationship Between the Risk and the Return of French Common Stocks

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Gabriel Hawawini
Claude Viallet

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Abstract

Recent work on the price behavior of French common stocks concluded that the evidence is consistent with equity pricing according to the Capital Asset Pricing Model (CAPM). In this paper we re-examine the evidence on the risk-return characteristics of French equity and show that the estimated parameters of the risk-return relationship exhibit strong seasonality. The risk- return relationship is not linear and portfolio size affect equity pricing during January. These results cast some doubt on the validity of the CAPM as a descriptor of French equity returns.

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Paper provided by Wharton School Rodney L. White Center for Financial Research in its series Rodney L. White Center for Financial Research Working Papers with number 9-88.

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Handle: RePEc:fth:pennfi:9-88

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  1. Gabriel Hawawini & Donald B. Keim, . "The Cross Section of Common Stock Returns: A Review of the Evidence and Some New Findings," Rodney L. White Center for Financial Research Working Papers 08-99, Wharton School Rodney L. White Center for Financial Research. [Downloadable!]
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This page was last updated on 2009-11-20.


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