Size and Earnings/Price Ratio Anomalies: One Effect or Two?

18 Pages Posted: 23 May 2006

See all articles by Thomas J. Cook

Thomas J. Cook

University of Denver - Daniels College of Business

Michael S. Rozeff

SUNY at Buffalo - Department of Financial & Managerial Economics

Abstract

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 [20] and Basu [4] 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

Cook, Thomas J. and Rozeff, Michael S., Size and Earnings/Price Ratio Anomalies: One Effect or Two?. Journal of Financial and Quantitative Analysis, Vol. 19, No. 4, December 1984. Available at SSRN: https://ssrn.com/abstract=903546

Thomas J. Cook

University of Denver - Daniels College of Business ( email )

2101 S. University Blvd.
Denver, CO 80208
United States

Michael S. Rozeff (Contact Author)

SUNY at Buffalo - Department of Financial & Managerial Economics ( email )

Buffalo, NY 14260
United States

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