The Book-to-Market and Size Effects in a General Asset Pricing Model: Evidence from Seven National Markets | Zendy

Neal Maroney | Zendy; Aris Protopapadakis | Zendy

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The Book-to-Market and Size Effects in a General Asset Pricing Model: Evidence from Seven National Markets

Author(s) -

Neal Maroney,

Aris Protopapadakis

Publication year - 2002

Publication title -

review of finance

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 4.933

H-Index - 61

eISSN - 1875-824X

pISSN - 1572-3097

DOI - 10.1023/a:1020188410677

Subject(s) - capital asset pricing model , economics , simultaneity , portfolio , macro , stochastic discount factor , financial economics , asset (computer security) , econometrics , value (mathematics) , computer science , physics , computer security , classical mechanics , programming language , machine learning

The positive relation of returns with Book-to-Market ratio (BE/ME) and their negative relation withMarket Value(MVE) remains strong under a general stochastic discount function (SDF) that does not depend on a specific asset pricing model and avoids potentially serious simultaneity biases inherent in the Fama and French three-factor model. However, we find that SDFs that include the equivalent of the HML portfolio do not span all asset sub-spaces, even with additional conditioning information. Finally, macro and financial variables we introduce to the pricing functions do not offer an alternative explanation of the BE/ME effect. JEL Classification codes: G10, G12, G15, G30.

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