On the conditional pricing effects of beta, size, and book-to-market equity in the Hong Kong market

Ho, Ron Yiu-wah, Strange, Roger and Piesse, Jenifer (2006) On the conditional pricing effects of beta, size, and book-to-market equity in the Hong Kong market. Journal of International Financial Markets, Institutions and Money, 16 (3). pp. 199-214. ISSN 1042-4431

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Abstract

Using Hong Kong equity stock data, this study examines empirically the pricing effects of beta, firm size, and book-to-market equity, but conditional on market situations, i.e. whether the market is up or down. Evidence supports the hypothesis that, if the risk variable is priced by the market, then there exists a systematic but conditional relation between the risk variable and average return, and this relation takes on opposite directions during up and down markets. However, the significance of the relations is often affected by the changing values of the risk variables as a result of changes in market conditions. Specifically, it is found that all three risk variables, namely beta, size, and book-to-market equity, exhibit conditional pricing effects. This is the first comprehensive study of its kind on Hong Kong market, which provides out-of-sample evidence relative to earlier tests on US data. The findings give important insights into capital market behaviour, which should prove useful in investment management and corporate financial decisions.

Item Type: Article
Schools and Departments: School of Business, Management and Economics > Business and Management
Depositing User: Roger Strange
Date Deposited: 06 Feb 2012 19:07
Last Modified: 03 May 2012 10:32
URI: http://sro.sussex.ac.uk/id/eprint/19306
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