The Size and Book-to-Market Effects Revisited

Lambert, Marie; Hubner, Georges

doi:10.2139/ssrn.1917431

Abstract

References (25)

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The Size and Book-to-Market Effects Revisited

Marie Lambert

University of Liege - HEC Management School; Maastricht University - School of Business and Economics; Free University of Brussels, Belgium - Solvay Brussels School of Economics and Management

HEC Management School - University of Liège; Maastricht University - Department of Finance; Gambit Financial Solutions

April 26, 2012

Abstract:
Fama and French (F&F) factors do not represent pure estimates of the size and book-to-market effects. We argue that the independent sorting procedure underlying the formation of the F&F mimicking portfolios distorts the rankings of US stocks along the size and book-to-market dimensions, causing spurious correlations between the premiums. Replacing independent rankings by conditional ones improves the properties of the individual risk premiums. As a major improvement, the technique delivers less specification errors when pricing passive investment indices.

Number of Pages in PDF File: 70

Keywords: Fama-French, Carhart, Size, Book-to-market, Momentum, Mimicking Portfolios

JEL Classification: G11, G12

working papers series

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Date posted: August 27, 2011 ; Last revised: November 23, 2012

Suggested Citation

Lambert, Marie and Hubner, Georges, The Size and Book-to-Market Effects Revisited (April 26, 2012). Available at SSRN: http://ssrn.com/abstract=1917431 or http://dx.doi.org/10.2139/ssrn.1917431

Contact Information

Marie Lambert (Contact Author) University of Liege - HEC Management School ( email ) Boulevard du Rectorat 7 (B31) LIEGE, Liege 4000 Belgium
Maastricht University - School of Business and Economics ( email ) Tongersestraat 53 P.O. Box 616 Maastricht, 6200 MD Netherlands HOME PAGE: http://www.fdewb.unimaas.nl/finance/?page=member&id=254
Free University of Brussels, Belgium - Solvay Brussels School of Economics and Management 19 Av Franklin Roosevelt 1050 Brussels Belgium
Georges Hubner HEC Management School - University of Liège ( email ) Rue Louvrex 14, Bldg. N1 Liege, 4000 Belgium +32 42327428 (Phone)
Maastricht University - Department of Finance ( email ) Maastricht, 6200 MD Netherlands
Gambit Financial Solutions ( email ) Rue Forgeur 17 Liège, 4000 Belgium

Abstract

References (25)

The Size and Book-to-Market Effects Revisited

Marie Lambert

Georges Hubner

Date posted: August 27, 2011 ; Last revised: November 23, 2012

Suggested Citation

Contact Information

Marie Lambert (Contact Author)

Georges Hubner