The apparent existence of two stock market anomalies, the earnings' yield (E/P ratio) and the market value (MV) effects, has stimulated considerable research. This study expands the E/P - MV literature by detecting the following: (1) both an E/P and a MV effect exist among a sample of industrial stocks over the 1970-1980 period; (2) using risk-adjusted returns, each of the E/P and MV effects persisted even after controlling the other; (3) an adjustment for a significant time bias in the returns data caused the MV anomaly to disappear after controlling for E/P ratios, but a significant E/P effect remained; and (4) in extreme instances (high E/P's and small MV's combined) the two anomalies appear to be independent and their combined return impact additive.
earnings, firm size, capital asset pricing model, CAPM, risk
The files in this collection are protected by copyright law. No commercial reproduction or distribution of these files is permitted without the written permission of Southern Methodist University, Cox Business School. These files may be freely used for educational purposes, provided they are not altered in any way, and Southern Methodist University is cited. For more information, contact firstname.lastname@example.org.
Peavy, III, John W. and Goodman, David A., "A Further Inquiry into the Market Value and Earnings' Yield Anaomalies" (1982). Working Papers. 24.