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Title: Book-to-market, firm size and the turn-of-the-year effect : evidence from Pacific-Basin emerging markets
Authors: Chui, Andy Chun Wai
Wei, John K. C.
Keywords: Stock returns
Market beta
Book-to-market equity
Pacific-Basin emerging markets
Turn-of-the-year effect
Issue Date: Aug-1998
Citation: Pacific-Basin finance journal, vol. 6, iss. 3-4, August 1998, p. 275-293
Abstract: This paper investigates the relationship between expected stock returns and market beta, book-to-market equity, and size in five Pacific-Basin emerging markets: Hong Kong, Korea, Malaysia, Taiwan, and Thailand. In all the markets examined, the relationship between average stock return and market beta is weak. On the other hand, the book-to-market equity can explain the cross-sectional variation of expected stock returns in Hong Kong, Korea, and Malaysia, while the size effect is significant in all five markets. Interestingly, the degree of the relation between average return and book-to-market equity coincides with the magnitude of the average book-to-market ratio in a country. We also find that large firms in Hong Kong and small firms in Korea have experienced higher returns in January. We argue that the different pattern of the 'turn-of-the-year' effect between Hong Kong and Korea may be attributed to a different composition of investors. The majority of investors in Hong Kong are foreign institutional investors, while investors in Korea are mainly individuals. Finally, we find that the seasonal behavior of size premiums is not only related to the composition of investors, but also related to the openness of the capital control policy.
Rights: Pacific-Basin Finance Journal © copyright (1998) Elsevier. The Journal's web site is located at
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