Dimension and Book-to-Market Ratio Again The English Case

• Author(s): Vieira, Pedro Rino ; Pereira, José Azevedo
• Date: 2006
• Persistent ID: http://hdl.handle.net/10400.5/2259
• Origin: Repositório da UTL
• Subject(s): Behavioural Finance; Size Effect; Book-to-Market Effect; CAPM; Efficient Market Hypothesis; Financial Investments
• Document Type: Other
• Language: English

Description

Using the Fama-French Model (1993) Daniel and Titman (1997) show that size and book-to-market effects cannot be understood as distress factor proxies, but as characteristics that explain the cross section variation in stock returns. Davis et al. (2000) refute these results using a different set of data. While addressing this question, we have found unexpected evidence against the Fama-French Model in the UK market and challenging results regarding the size and book-to-market effects in both the UK and USA. Our findings, at the very least, suggest a bad CAPM specification and, at most, suggest that financial markets are not efficient.