Can book-to-market and size be risk factors that predict economic growth in Asia's emerging economies?

Clements, Adam, Drew, Michael, Krpan, Ivan, & Veeraraghavan, Madhu (2009) Can book-to-market and size be risk factors that predict economic growth in Asia's emerging economies? Finance India, 23(4), pp. 1213-1230.

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We investigate whether the two 2 zero cost portfolios, SMB and HML, have the ability to predict economic growth for markets investigated in this paper. Our findings show that there are only a limited number of cases when the coefficients are positive and significance is achieved in an even more limited number of cases. Our results are in stark contrast to Liew and Vassalou (2000) who find coefficients to be generally positive and of a similar magnitude. We go a step further and also employ the methodology of Lakonishok, Shleifer and Vishny (1994) and once again fail to support the risk-based hypothesis of Liew and Vassalou (2000). In sum, we argue that search for a robust economic explanation for firm size and book-to-market equity effects needs sustained effort as these two zero cost portfolios do not represent economically relevant risk.

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ID Code: 32296
Item Type: Journal Article
Refereed: Yes
Additional URLs:
Keywords: Asset pricing, Economic growth, Size effect, Value effect
ISSN: 0970-3772
Subjects: Australian and New Zealand Standard Research Classification > ECONOMICS (140000) > APPLIED ECONOMICS (140200) > Financial Economics (140207)
Divisions: Current > QUT Faculties and Divisions > QUT Business School
Past > QUT Faculties & Divisions > Faculty of Built Environment and Engineering
Current > Schools > School of Economics & Finance
Past > Schools > School of Urban Development
Copyright Owner: Copyright 2009 Indian Institute of Finance
Deposited On: 23 May 2010 22:42
Last Modified: 29 Feb 2012 14:07

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