Size and Book-to-Market Factors in
Earnings and Returns
EUGENE F. FAMA and KENNETH R. FRENCH*
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The Journal of Finance
Volume 50, Issue 1
Size和Market-to-book ratio对于profitability的解释力。
ABSTRACT
We study whether the behavior of stock prices, in relation to size and book-to-market-equity
(BE/ME), reflects the behavior of earnings. Consistent with rational
pricing, high BE/ME signals persistent poor earnings and low BE/ME signals
strong earnings. Moreover, stock prices forecast the reversion of earnings growth
observed after firms are ranked on size and BE/ME. Finally, there are market, size,
and BE/ME factors in earnings like those in returns. The market and size factors
in earnings help explain those in returns, but we find no link between BE/ME
factors in earnings and returns.
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