Use this link to view the PDF file: Size and Book-to-Market: Comparing Factor Loadings, Characteristics, Methodologies, and Time Periods
Size and Book-to-Market: Comparing Factor Loadings, Characteristics, Methodologies, and Time Periods
The Journal of Finance Issues
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.