The Relations between Size effect and Returns in the Taiwan Stock Market

• Main Authors: Hui-Ling Chang, 張慧玲
• Other Authors: Ching-Chih Hsu
• Format: Others
• Language: zh-TW
• Published: 1999
• Online Access: http://ndltd.ncl.edu.tw/handle/83453704617178700268

碩士 === 淡江大學 === 財務金融學系 === 87 === Sharpe''''（1964）Capital Assets Pricing Model（CAPM）proposed a better measure indications about return and risk trade-off relation. Then, Ross''''（1973）arbitrage pricing theory（APT）can provide a better description of average returns. The excess market return of the CAPM is a relevant risk in many multifactor alternatives. Moreover, Banz（1981）propose size effect and find CAPM may be mispricing. In related articles, Fama and French（1992 and 1993）argue that size and book-to-market play a dominant role in explaining cross-sectional differences in expected returns. In this study, base on samples from securities of Taiwan stock market and covers the period of January 1989 to December 1998. We employ the models in Knez and Ready（1997）to analyze the level of explanatory power of size and book-to-market ratio through the stock returns cross-sectional regressions and t-test. The empirical results show as follows: 1. There is no significant negatively relations between the size and stock returns in Taiwan stock market. Size is not a statistically significant variable explaining current returns. In other word, size effect does not exist in Taiwan stock market. 2. There is no significant positively relations between the book-to-market ratio and stock returns in Taiwan stock market. Book-to-market ratio is not a statistically significant variable explaining current returns. In other word, book-to-market ratio effect does not exist in Taiwan stock market.