SIZE AND BOOK-TO-MARKET EFFECTS IN THE RETURNS ON INFORMATION TECHNOLOGY STOCKS

Abstract

This paper explores the relationship between size, book-to-market, beta, and expected stock returns in the U.S. Information Technology sector over the July 1990–June 2001 period. Two models, the multivariate model and the three-factor model, are employed to test these relationships. The risk-return tests confirm the relationship between size, book-to-market, beta and stock returns in IT stocks is different from that in other non-financial stocks. However, the sub-period results (the periods before and after the technology crash in April 2000) show that the nature of the relationship between stock returns, size, book-to-market, and market factors, or the magnitude of the size, book-to-market, and market premiums, is on average unchanged for both sub-periods. This result suggests the technology stock crash in April 2000 was not a correction of stock prices.

Citation

Nguyen, Q.-N., Fetherston, T.A. and Batten, J.A. (2005), "SIZE AND BOOK-TO-MARKET EFFECTS IN THE RETURNS ON INFORMATION TECHNOLOGY STOCKS", Research in Finance (Research in Finance, Vol. 21), Emerald Group Publishing Limited, Leeds, pp. 45-91. https://doi.org/10.1016/S0196-3821(04)21003-6