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The cross-section of Expected Returns Method applied on data from American stocks

Holst, Aracelly and Saverchenko, Vladimir (2009)
Department of Business Administration
Abstract
The main purpose of this thesis is to study the impact of a number of independent variables on the cross-section of expected returns on NYSE, ALTERNEXT (formed AMEX) and NASDAQ stocks between 1990 and 2008 in the American market. The analysis is based on methods presented in a number of scientific articles, which will be dealt with below. This study starts with the formation of portfolios by pre-ranked betas of individual securities, follow by the calculation of equal weighted portfolios in order to form post-ranked beta portfolios. Then cross-section regressions are run to study the impact of different independent variables such as market beta, size, book to market equity, leverage 1, leverage 2 and earnings to price. We use the Thompson... (More)
The main purpose of this thesis is to study the impact of a number of independent variables on the cross-section of expected returns on NYSE, ALTERNEXT (formed AMEX) and NASDAQ stocks between 1990 and 2008 in the American market. The analysis is based on methods presented in a number of scientific articles, which will be dealt with below. This study starts with the formation of portfolios by pre-ranked betas of individual securities, follow by the calculation of equal weighted portfolios in order to form post-ranked beta portfolios. Then cross-section regressions are run to study the impact of different independent variables such as market beta, size, book to market equity, leverage 1, leverage 2 and earnings to price. We use the Thompson DataStream system to download the data needed. The results of this study show that we did not find any association among average stock returns and any explanatory variable studied in this thesis for the time period 1990 to 2008, which contradicts the paper by Fama and French (1992). (Less)
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author
Holst, Aracelly and Saverchenko, Vladimir
supervisor
organization
year
type
H1 - Master's Degree (One Year)
subject
keywords
Management of enterprises, Fama & French and Fama & MacBeth regressions., Cross-sectional regression, cross-sectional variation in average returns, Företagsledning, management
language
Swedish
id
1437576
date added to LUP
2009-06-04 00:00:00
date last changed
2012-04-02 17:44:06
@misc{1437576,
  abstract     = {The main purpose of this thesis is to study the impact of a number of independent variables on the cross-section of expected returns on NYSE, ALTERNEXT (formed AMEX) and NASDAQ stocks between 1990 and 2008 in the American market. The analysis is based on methods presented in a number of scientific articles, which will be dealt with below. This study starts with the formation of portfolios by pre-ranked betas of individual securities, follow by the calculation of equal weighted portfolios in order to form post-ranked beta portfolios. Then cross-section regressions are run to study the impact of different independent variables such as market beta, size, book to market equity, leverage 1, leverage 2 and earnings to price. We use the Thompson DataStream system to download the data needed. The results of this study show that we did not find any association among average stock returns and any explanatory variable studied in this thesis for the time period 1990 to 2008, which contradicts the paper by Fama and French (1992).},
  author       = {Holst, Aracelly and Saverchenko, Vladimir},
  keyword      = {Management of enterprises,Fama & French and Fama & MacBeth regressions.,Cross-sectional regression,cross-sectional variation in average returns,Företagsledning,management},
  language     = {swe},
  note         = {Student Paper},
  title        = {The cross-section of Expected Returns Method applied on data from American stocks},
  year         = {2009},
}