Fama and French examined the relationship between the Book Value to Market Value ratio and average stock returns and found
A) no evidence of a relationship for U.S. stocks.
B) evidence of a negative relationship in U.S. stocks only.
C) evidence of a positive relationship for Japanese stocks only.
D) evidence of a negative relationship for U.S. and Japanese stocks.
E) evidence of a positive relationship for U.S. and Japanese stocks.

Question

Quizplus · Accepted Answer

Fama and French found evidence of a positive relationship between the Book Value to Market Value ratio and average stock returns, not just for U.S. stocks but also for Japanese stocks. This means that stocks with higher book-to-market ratios tend to have higher average returns.

Fama and French Examined the Relationship Between the Book Value