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Book-to-Market across Firm Size, Exchange, and Seasonality: Is There an Effect?

Listed author(s):
  • Loughran, Tim
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    Fama and French (1992) report that size and the book-to-market ratio capture the cross-sectional variation of average stock returns for the universe of NYSE, Amex, and Nasdaq securities. This paper, in providing an exhaustive exploration of book-to-market across the dimensions of firm size, exchange listing, and calendar seasonally, reports that Fama and French's empirical findings are driven by two features of the data: a January seasonal in the book-to-market effect, and exceptionally low returns on small, young, growth stocks. In the largest size quintile of all firms (accounting for 73% of the total market value of all publicly traded firms), book-to-market has no significant explanatory power on the cross-section of realized returns during the 1963–1995 period. Thus, book-to-market as such would have less importance to money managers than the literature would have led us to believe.

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    Article provided by Cambridge University Press in its journal Journal of Financial and Quantitative Analysis.

    Volume (Year): 32 (1997)
    Issue (Month): 03 (September)
    Pages: 249-268

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    Handle: RePEc:cup:jfinqa:v:32:y:1997:i:03:p:249-268_00
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    Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK

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