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
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