Fama and French (1992) found that the stocks of firms within the highest decile of book-to-market ratios had average monthly returns of _______, while the stocks of firms within the lowest decile of book-to-market ratios had average monthly returns of ________.
A)greater than 1%; greater than 1%
B)greater than 1%; less than 1%
C)less than 1%; greater than 1%
D)less than 1%; less than 1%
E)less than 0.5%; greater than 0.5%

Question

Quizplus · Accepted Answer

This finding suggests either that low book-to-market ratio firms are relatively overpriced or that the book-to-market ratio is serving as a proxy for a risk factor that affects expected equilibrium returns.

Fama and French (1992) Found That the Stocks of Firms