Not Available for Download

Size and Book to Market Factors in Earnings and Returns

Posted: 10 May 2000  

Eugene F. Fama

University of Chicago - Finance

Kenneth R. French

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

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 Classification: G12, G3

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: https://ssrn.com/abstract=5903

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

Tuck School of Business at Dartmouth ( email )

Hanover, NH 03755
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Paper statistics

Abstract Views
16,912