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The Effects of Beta, Bid‐Ask Spread, Residual Risk, and Size on Stock Returns

The Effects of Beta, Bid‐Ask Spread, Residual Risk, and Size on Stock Returns ABSTRACT Merton's (26) recent extension of the CAPM proposed that asset returns are an increasing function of their beta risk, residual risk, and size and a decreasing function of the public availability of information about them. Associating the latter with asset liquidity and following Amihud and Mendelson's (2) proposition that asset returns increase with their illiquidity (measured by the bid‐ask spread), we jointly estimate the effects of these four factors on stock returns. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Finance Wiley

The Effects of Beta, Bid‐Ask Spread, Residual Risk, and Size on Stock Returns

The Journal of Finance , Volume 44 (2) – Jun 1, 1989

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References (32)

Publisher
Wiley
Copyright
1989 The American Finance Association
ISSN
0022-1082
eISSN
1540-6261
DOI
10.1111/j.1540-6261.1989.tb05067.x
Publisher site
See Article on Publisher Site

Abstract

ABSTRACT Merton's (26) recent extension of the CAPM proposed that asset returns are an increasing function of their beta risk, residual risk, and size and a decreasing function of the public availability of information about them. Associating the latter with asset liquidity and following Amihud and Mendelson's (2) proposition that asset returns increase with their illiquidity (measured by the bid‐ask spread), we jointly estimate the effects of these four factors on stock returns.

Journal

The Journal of FinanceWiley

Published: Jun 1, 1989

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