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Size and Book to Market Factors in Earnings and Returns

Eugene F. Fama
University of Chicago - Booth School of Business

Kenneth R. French
Dartmouth College - Tuck School of Business; National Bureau of Economic Research (NBER)



JOURNAL OF FINANCE, Vol 50, No 1, March 1995

Abstract:     
We study whether the behavior of stock prices, in relation to size and book to market equity (BE/ME), reflects the behavior of earnings. Consistent with rational pricing, high BE/ME signals persistent poor earnings and low BE/ME signals strong earnings. Moreover, stock prices forecast the reversion of earnings growth observed after firms are ranked on size and BE/ME. Finally, there are market, size, and BE/ME factors in earnings like those in returns. The market and size factors in earnings help explain those in returns, but we find no link between BE/ME factors in earnings and returns.

JEL Classifications: G12, G3

Accepted Paper Series

Date posted: May 10, 2000 ; Last revised: November 05, 2001

Suggested Citation

Fama, Eugene F. and French, Kenneth R., Size and Book to Market Factors in Earnings and Returns. JOURNAL OF FINANCE, Vol 50, No 1, March 1995. Available at SSRN: http://ssrn.com/abstract=5903


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Contact Information

Eugene F. Fama (Contact Author)
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-7282 (Phone)
773-702-9937 (Fax)
Kenneth R. French
Dartmouth College - Tuck School of Business ( email )
Hanover, NH 03755
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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