Abstract

http://ssrn.com/abstract=98678
 
 

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Characteristics, Covariances, and Average Returns: 1929-1997


James L. Davis


Dimensional Fund Advisors Inc.

Eugene F. Fama


University of Chicago - Finance

Kenneth R. French


Dartmouth College - Tuck School of Business; National Bureau of Economic Research (NBER)

February 1999

Center for Research in Security Prices (CRSP) Working Paper No. 471

Abstract:     
The value premium in U.S. stocks returns is robust. The positive relation between average return and book-to-market equity (BE/ME) is as strong for 1929-63 as for the subsequent period studied in previous papers. Like others, we also find a size premium in stock returns. Small stocks have higher average returns than big stocks. The size premium is, however, weaker and less reliable than the value premium. The relations between average return and firm characteristics (size and BE/ME) are better explained by a three-factor risk model than by the behavioral hypothesis that investor overreaction causes characteristics to be compensated irrespective of risk loadings.

Number of Pages in PDF File: 24

JEL Classification: G12

working papers series


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Date posted: August 12, 1998  

Suggested Citation

Davis, James L. and Fama, Eugene F. and French, Kenneth R., Characteristics, Covariances, and Average Returns: 1929-1997 (February 1999). Center for Research in Security Prices (CRSP) Working Paper No. 471. Available at SSRN: http://ssrn.com/abstract=98678 or http://dx.doi.org/10.2139/ssrn.98678

Contact Information

James L. Davis
Dimensional Fund Advisors Inc. ( email )
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
United States
Eugene F. Fama (Contact Author)
University of Chicago - Finance ( 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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