publication . Other literature type . Article . 1992

The Cross‐Section of Expected Stock Returns

Eugene F. Fama; Kenneth R. French;
  • Published: 01 Jun 1992
  • Publisher: Wiley
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 3, size, leverage, book-to-market equity, and earnings-price ratios. Moreover, when the tests allow for variation in 3 that is unrelated to size, the relation between market /3 and average return is flat, even when 3 is the only explanatory variable. THE ASSET-PRICING MODEL OF Sharpe (1964), Lintner (1965), and Black (1972) has long shaped the way academics and practitioners think about average returns and risk. The central prediction of the model is that the market portfolio of invested wealth is mean-va...
Subjects
free text keywords: January effect, Price–sales ratio, Economics, Growth stock, Capital asset pricing model, Stock valuation, Security market line, Market anomaly, Low-volatility anomaly, Financial economics, Finance, business.industry, business, Consumption-based capital asset pricing model, Expected return, Standard deviation, Econometrics, Standard error, Predictive power, Stock (geology), Economics and Econometrics, Accounting
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