THREEFACTORMODELFAMAANDFRENCH1992精选.ppt

Leverage Two leverage ratios are used A/ME (book assets to market equity) - Measure of market leverage A/BE (book assets to book equity) - Measure of book leverage Both leverage ratios are related to average returns, with opposite signs but similar absolute values The difference between these ratios is what helps explain average returns Table IIIAverage Slopes (T-Statistics) from Month-by-Month Regressions of Stock Returns on β, Size, Book-to-Market Equity, Leverage, and E/P Leverage Book-to-Market ln(BE/ME) = ln(A/ME) – ln(A/BE) Close link between leverage and BE/ME Two interpretations: High book-to-market ratio could be low stock price compared to book value High book-to-market ratio could be a firms market leverage is high relative to its book leverage Relative distress (captured by BE/ME) can also be viewed as a leverage effect (captured by the difference between A/ME and A/BE) E/P It is believed that earnings are a proxy for future earnings E/P dummy is used because negative earnings are not a proxy for future earnings E/P dummy (negative earnings) has a strong relationship with returns Add size to the regression and the relationship becomes insignificant This shows that the high returns for negative E/P is better explained by size E(+)/P has a strong relationship with returns Table IIIAverage Slopes (T-Statistics) from Month-by-Month Regressions of Stock Returns on β, Size, Book-to-Market Equity, Leverage, and E/P Table IVProperties of Portfolios Formed on Earnings-Price Ratio (E/P) E/P Book-to-market Regressions of returns on ME, BE/ME and E/P gives insignificant results for E/P Regressions of returns using ME, BE/ME and E/P produce very similar results to regressions using just ME and BE/ME for ME and BE/ME Suggests that E/P is insignificant in explaining returns when book-to-market ratios are used Results suggest that the relationship between E(+)/P and average return is mostly due to the positive correlation between E/P and BE/ME F