Interaction of size, book-to-market and momentum effects in Australia

Michael A. O'Brien*, Tim Brailsford, Clive Gaunt

*Corresponding author for this work

Research output: Contribution to journalArticleResearchpeer-review

34 Citations (Scopus)

Abstract

This study seeks to disentangle the effects of size, book-to-market and momentum on returns. Initial results show that each characteristic has a role in explaining returns, but that there is interaction between size and momentum, as well as between size and book-to-market. Three key findings emerge. First, the size premium is the strongest, particularly in the loser portfolios. Second, the value premium is generally limited to the smallest portfolios. Third, the momentum premium is evident for the large- and middle-sized portfolios, but loser stocks significantly outperform winner stocks in the smallest size portfolio. When these interactions are controlled with multivariate regression, we find a significant negative average relation between size and returns, a significant positive average relation between book-to-market and returns, and a significant positive average relation between momentum and returns.

Original languageEnglish
Pages (from-to)197-219
Number of pages23
JournalAccounting and Finance
Volume50
Issue number1
DOIs
Publication statusPublished - Mar 2010
Externally publishedYes

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