Title: The Size and Book to Market Effects in New Zealand
Abstract: This paper finds that both size and book to market ratios are strong explanatory variables of returns in the New Zealand share market. When the size and book to market variables are combined in certain ways even stronger relationships with returns exist. These findings contradict earlier predictions that beta was the only variable with the ability to explain returns. The size effect can be said to be a proxy for the market risk, in that portfolios of small companies have high volatility of return. Thus the size effect is explained without destroying the EMH. Findings on Book to Market confirm those of others. Support is given to the arguments of Fama and French to reject beta as a one factor explanatory variable for returns and include factors for size and book to market equity.
Publication Year: 1997
Publication Date: 1997-01-01
Language: en
Type: article
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Cited By Count: 6
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