The variables include turnover rate, Idiosyncratic risk, percentage of zero volume days, size and book to market ratio
. Firm level data is employed to observe the impact of information environment quality variables on SPS.
Dichev (1998) analyzed the relationship of bankruptcy risk with size and book to market ratio
by using widely used models (Altaian's model and Ohlson's model) as a measure of bankruptcy risk.
The following groups of explanatory variables were identified: 1) sales, book to market ratio
, cash flow, leverage and cash to ossesi, 2) sales and book to market ratio
, 3) sales, 4) leverage.
Besides, Var 21 (book to market ratio
) is also considered to make a general assessment, and also to investigate the influence of market factor for default prediction.
Market return market capitalization, book to market ratio
, and market value were taken as the independent variables.
Book to market ratio
and leverage is the best predictor, while size was found to be insignificant.
Evidencias empiricas da relacao cross-section entre retorno e earnings to price ratio e book to market ratio
no mercado de acoes no Brasil no periodo de 1995 a 1998.
Based on these observations, the Fama French Three Factor Model asserts that the expected return on a portfolio in excess of the risk free rate is explained by the sensitivity of its return to three factors: (1) the excess return on a broad market portfolio, (2) the difference between the return on a portfolio of small capitalization stocks, and (3) the return on a portfolio of big capitalization stocks and the difference between the return on a portfolio of high book to market ratio
stocks and the return on a portfolio of low book to market ratio
stocks, thus adding two new factors: the firm size and the value effect.
Fama and French (2008b, p.2973) explain the motivation for using the book to market ratio
as a proxy for a factor which affects expected returns by noting that the dividend per share is earnings per share less the change in book value per share.
Empirical model with five firm specific variables namely, book to market ratio
, institutional neglect, average daily trading volume, debt-equity ratio, and operating profit ratio has been used to analyse the size effect.
Six variables used were beta, log of size (market capitalisation), earnings yield, cash earnings yield, dividend yield and book to market ratio
. This paper briefly reviews the relevant literature and presents evidence that risk is multidimensional.
BOOK/[MKT.sub.j] = the bidder's book to market ratio