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  • 2019 Fall: Volume 18, Issue 2
  • Size and Book-to-Market: Comparing Factor Loadings, Characteristics, Methodologies, and Time Periods

    • Tim Mooney

    Title:

    Size and Book-to-Market: Comparing Factor Loadings, Characteristics, Methodologies, and Time Periods

    Author(s):

    Tim Mooney

    Publication Date:

    2019

    Journal Title:

    The Journal of Finance Issues

    Volume Number:

    18

    Issue Number:

    2

    Abstract:

    We show new evidence of firm size and book-to-market as priced risk factors in an empirical asset pricing model. A robust size and value premium persists across 1963-1991 and 1992-2017 sub-samples. Characteristics-based models do a better job explaining variation in stock returns than models based on factor loadings. An instrumental variable approach using individual stocks as test assets performs better than one using portfolios. We also present a decile-based measure of size and value with risk premium estimates that are intuitive to interpret. Results have implications for how investors might better understand exposure to systematic risk factors.

    First Page:

    1

    Last Page:

    18

    Total Pages:

    18