Journal of Finance2014-09-28 5:02 PM

Multifactor Explanations of Asset Pricing Anomalies

ABSTRACT

Previous work shows that average returns on common stocks are related to firm characteristics like size, earnings/price, cash flow/price, book-to-market equity, past sales growth, long-term past return, and short-term past return. Because these patterns in average returns apparently are not explained by the CAPM, they are called anomalies. We find that, except for the continuation of short-term returns, the anomalies largely disappear in a three-factor model. Our results are consistent with rational ICAPM or APT asset pricing, but we also consider irrational pricing and data problems as possible explanations.


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Journal of Finance

The Journal of Finance publishes leading research across all the major fields of financial research. It is the most widely cited academic journal on finance.

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