Volume, Opinion Divergence and Book-to-Market Anomaly
Suffolk University - Sawyer School of Management
Aug 1, 2012
Journal of Knowledge Globalization, 5(1), 29-45
Ali et al (2003) finding about the mispricing explanation on B/M anomaly is replicated by including risk compensation explanation. The proxy for opinion divergence in this study is unexpected volume which is also used by Garfinkel and Sokobin (2006). The finding supported investors’ treatment of unexpected volume proxies opinion divergence as an additional risk that requires ex post compensation. I documented that B/M effect increases with the opinion divergence. I also directly test Varian (1985) argument empirically and provide support for the compensation for risk to the B/M-based portfolio returns as suggested by Fama and French (1992, 1993, 1997).
Number of Pages in PDF File: 20
Keywords: Opinion Divergence, Arbitrage risk, Book-to-market
JEL Classification: G11, G14Accepted Paper Series
Date posted: September 15, 2006 ; Last revised: September 10, 2012
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