Size and Earnings/Price Ratio Anomalies: One Effect or Two?
18 Pages Posted: 23 May 2006
Studies of size and earnings/price ratio effects together have produced contradictory results. Does one effect subsume the other or are there two separate effects? This paper demonstrates that equity returns are related to both size and earnings/price ratio as well as the month of January. Reinganum  and Basu  are reexamined to find the reasons for their contradictory results. Reinganum's finding that size subsumes earnings/price ratio is caused by a fortuitous choice of methods. Basu's finding that earnings/price ratio subsumes size appears to be sample-specific.
Keywords: anomalies, size effect, earnings/price ratio effect, January effect
JEL Classification: G14
Suggested Citation: Suggested Citation