Robust Measurement of Size and Book-to-Market Premia

28 Pages Posted: 27 Jun 2003

See all articles by Chih-Chiang Hsu

Chih-Chiang Hsu

National Central University at Taiwan - Department of Economics

Robin K. Chou

National Chengchi University

Abstract

In this paper we use the quantile regression to analyze size and book-to-market effects on the conditional distribution of stock returns. In contrast with Knez and Ready (1997), the quantile regression can obtain more robust results without trimming informative extremes. We find that size and book-to-market exhibits asymmetric effects on return quantiles. Comparing with Fama and French (1992), the negative relation between size and returns only occurs in stocks that performs well above the average (winners). However, the robust measurements show that size has positive effects on returns. The book-to-market premium has similar influences on return quantiles and is a more consistent risk factor than size does. We also find that the size and book-to-market effects on the tails of the return distribution may have changed since 1982. Our results provide practical implications on momentum strategies.

Keywords: Asset pricing, Quantile regression, Size and Book-to-Market effects

JEL Classification: G12, G14

Suggested Citation

Hsu, Chih-Chiang and Chou, Robin K., Robust Measurement of Size and Book-to-Market Premia. Available at SSRN: https://ssrn.com/abstract=407726 or http://dx.doi.org/10.2139/ssrn.407726

Chih-Chiang Hsu (Contact Author)

National Central University at Taiwan - Department of Economics ( email )

No. 300, Zhongda Road
Chung-Li Taiwan, 32054
Taiwan
+886 3 4227151 (Phone)
+886 3 4222876 (Fax)

Robin K. Chou

National Chengchi University ( email )

No. 64, Chih-Nan Road
Section 2
Wenshan, Taipei, 11623
Taiwan
+886-2-29393091 ext. 81016 (Phone)

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