An Examination of Conditional Effect on Cross-Sectional Returns: Singapore Evidence
This paper examines the application of conditional effect across up and down markets based on the sign of market excess return to market beta and to some firm-specific factors of firm size, book-to-market equity ratio (B/M), and earnings-to-price ratio (E/P). Consistent with previous studies, though beta plays no role under unconditional framework, there is evidence of a significantly positive (negative) risk premium on beta during periods of up (down) markets, supporting for the continuous use of beta as a risk measure. Interestingly, our results show that firm size is the only significant variable in explaining average returns but loses its capability to do so under the unconditional and conditional frameworks respectively. Moreover, significant conditional effect of E/P is found. Although B/M alone is not significantly conditionally related to returns, in various combinations with beta, it becomes significant and the joint role of beta and B/M has an amplified gain in the explanatory power. We also find evidence that investors in the Singapore stock market react virtually the same to these firm-specific factors and to beta during up and down markets.
Beta firm size book-to-market equity ratio earnings-to-price ratio up and down markets
Simon M. S. So Gordon Y. N. Tang
Faculty of Business Administration University of Macau Avenida Padre Tomas Pereira, Taipa, Macau, Ch Department of Finance and Decision Sciences Hong Kong Baptist University Kowloon Tone. Kowloon. Hong
国际会议
昆明
英文
1-36
2005-07-05（万方平台首次上网日期，不代表论文的发表时间）