Showing papers on "Market capitalization published in 1986"

The CAPM and Equity Return Regularities

Abstract: Differential returns on dividend and capital gains income, systematic abnormal returns surrounding ex-dividend dates, excess returns on small versus large capitalization stocks, excess returns on low versus high price-earnings ratio stocks-these are among the recent findings that cast doubt on the traditional Capital Asset Pricing Model and tease investors with the promise of systematic excess returns. Some of these effects are undoubtedly related. Tests indicate, for example, that the higher a portfolio's price to book ratio, the higher the corresponding values of market capitalization, PIE and stock price. Furthermore, P/E, dividend yield, price and PIE effects all experience significant January seasonals. What has not been conclusively determined is whether the effects are additive. So far, it appears that the dividend yield and size effects are not mnutually exclusive. Investors may want to use a strategy employing several of these characteristics, rather than one. Efforts to explain the size effect have focused on January, because the effect is concentrated in that month. The most common hypothesis attributes this to year-end tax-loss selling, but the evidence is less than conclusive. Evidence strongly suggests, however, that, among small firms, those with the largest abnormal returns tend to be the firms that have recently become small, that either don't pay dividends or have higher dividend yields, and that have lower prices and low PIE ratios.

An investigation into the small firm effect on the Johannesburg Stock Exchange

Abstract: Recent studies on the New York Stock Exchange have provided empirical evidence which suggests that small market capitalization firms outperform large market capitalization firms in terms of share price performance. This appears valid even after adjusting for the additional risk borne by the small firms. This has become known as the 'small firm effect' and questions the validity of many traditional pricing models such as the Capital Asset Pricing Model. In this paper, the small firm effect is examined on the Johannesburg Stock Exchange. The risk-adjusted performance of portfolios comprising large firms is contrasted with that of small firms. Three measures of size are used, namely market capitalization, asset base and traded volume. In all three cases, no evidence of a small firm effect is apparent. Indeed, if anything, the large firms appear to provide superior investment performance on the JSE.