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Do Stock Market Anomalies Disappear? The Example of Small Size and Market-to-Book Premia at the London Stock Exchange

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Financial Modelling

Part of the book series: Contributions to Management Science ((MANAGEMENT SC.))

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Abstract

Empirical literature finds the existence of patterns in average returns on common stocks that apparently are not explained by risk factors. Those patterns are shown to be related to firm characteristics, in particular size and market to book value. This paper analyses the London Stock Exchange to investigate whether small premia exist and are persistent over time. The paper also suggests that contrarian strategies can be refined using sector relative rather then absolute indicators of firm characteristics. Results show that the strategies based on relative factors dominate strategies based on absolute factors in particular when the ordering variable is the market to book value. The paper also shows that these premia tend to disappear over time.

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Author information

Authors and Affiliations

  1. Department of Economics, University of Rome Tor Vergata, Via di Tor Vergata snc, Roma, 00133, Italy

    Leonardo Becchetti & Laura Cavallo

Authors
  1. Leonardo Becchetti
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  2. Laura Cavallo
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Editor information

Editors and Affiliations

  1. Department of Financial Economics and Mathematics, University of Valencia, Avda. de los Naranjos s/n., Valencia, 46022, Spain

    María Bonilla , Trinidad Casasús  & Ramón Sala ,  & 

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© 2000 Springer-Verlag Berlin Heidelberg

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Becchetti, L., Cavallo, L. (2000). Do Stock Market Anomalies Disappear? The Example of Small Size and Market-to-Book Premia at the London Stock Exchange. In: Bonilla, M., Casasús, T., Sala, R. (eds) Financial Modelling. Contributions to Management Science. Physica, Heidelberg. https://doi.org/10.1007/978-3-642-57652-2_2

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  • DOI: https://doi.org/10.1007/978-3-642-57652-2_2

  • Publisher Name: Physica, Heidelberg

  • Print ISBN: 978-3-7908-1282-4

  • Online ISBN: 978-3-642-57652-2

  • eBook Packages: Springer Book Archive

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