Premium
Characteristics, Covariances, and Average Returns: 1929 to 1997
Author(s) -
Davis James L.,
Fama Eugene F.,
French Kenneth R.
Publication year - 2000
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/0022-1082.00209
Subject(s) - economics , econometrics , value premium , risk premium , equity premium puzzle , financial economics , equity (law) , capital asset pricing model , stock (firearms) , stock market , value (mathematics) , market risk , mathematics , statistics , geography , context (archaeology) , archaeology , political science , law
The value premium in U.S. stock returns is robust. The positive relation between average return and book‐to‐market equity is as strong for 1929 to 1963 as for the subsequent period studied in previous papers. A three‐factor risk model explains the value premium better than the hypothesis that the book‐to‐market characteristic is compensated irrespective of risk loadings.