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THE EFFECT OF SIZE, BOOK‐TO‐MARKET EQUITY, PRIOR RETURNS, AND BETA ON STOCK RETURNS: JANUARY VERSUS THE REMAINDER OF THE YEAR
Author(s) -
Fant L. Franklin,
Peterson David R.
Publication year - 1995
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/j.1475-6803.1995.tb00557.x
Subject(s) - remainder , equity (law) , beta (programming language) , stock (firearms) , economics , financial economics , excess return , econometrics , monetary economics , business , mathematics , computer science , arithmetic , engineering , biology , context (archaeology) , political science , law , programming language , mechanical engineering , paleontology
Size and book‐to‐market equity are shown to transcend beta in explaining stock returns. One possible explanation of the book‐to‐market equity effect is overreaction. We investigate the effect of size, book‐to‐market equity, prior returns, and beta on stock returns. We find significant reversals in January consistent with overreaction. We find a strong positive relation between returns and prior returns for February through December. Both patterns are distinct from either a size or book‐to‐market equity effect. Book‐to‐market equity is significantly related to returns, with some evidence of a stronger effect in January.