Evidence on the Characteristics of Cross Sectional Variation in Stock Returns

1997/03/01 by KENT DANIEL, Kent Daniel, Sheridan Titman +1 · 12 citations
Economics, Econometrics and Finance · Business, Management and Accounting · #Financial Markets and Investment Strategies #Corporate Finance and Governance #Housing Market and Economics

paper · doi:10.1111/j.1540-6261.1997.tb03806.x

Abstract

ABSTRACT Firm sizes and book‐to‐market ratios are both highly correlated with the average returns of common stocks. Fama and French (1993) argue that the association between these characteristics and returns arise because the characteristics are proxies for nondiversifiable factor risk. In contrast, the evidence in this article indicates that the return premia on small capitalization and high book‐to‐market stocks does not arise because of the comovements of these stocks with pervasive factors. It is the characteristics rather than the covariance structure of returns that appear to explain the cross‐sectional variation in stock returns.

Citations

• Economic Forces and the Stock Market
• Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency
• An Intertemporal Capital Asset Pricing Model
• Does the Stock Market Overreact?

Cited by

• On Persistence in Mutual Fund Performance
• Market Reactions to Tangible and Intangible Information
• Conditioning Variables and the Cross Section of Stock Returns
• Corporate Investment and Asset Price Dynamics: Implications for the Cross‐section of Returns
• Empirical Evidence on Capital Investment, Growth Options, and Security Returns
• The Role of Corporate Culture in Bad Times: Evidence from the COVID-19 Pandemic
• Financial Constraints and Stock Returns
• Employee Satisfaction and Long-Run Stock Returns, 1984–2020
• Finance Capitalism and Germany's Rise to Industrial Power
• Understanding earnings quality: A review of the proxies, their determinants and their consequences
• Uniform Inference for Characteristic Effects of Large Continuous-Time\n Linear Models
• Deciphering equity style returns: An analysis of size and value anomalies in the Pakistani stock exchange. [europepmc]

Related

• Conditioning Variables and the Cross Section of Stock Returns
• Does Greater Firm‐Specific Return Variation Mean More or Less Informed Stock Pricing?
• Investment‐Based Expected Stock Returns
• Asset Growth and the Cross‐Section of Stock Returns
• A two-Factor Asset Pricing Model and the Fat Tail Distribution of Firm Sizes