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Journal of Finance Vol. 44 No. 2 1989

The Effects of Beta, Bid‐Ask Spread, Residual Risk, and Size on Stock Returns

Yakov Amihud; Haim Mendelson1,2,3

1 Roberts Wesleyan College · 2 University of Rochester · 3 New York University

Abstract

Merton's [26] recent extension of the CAPM proposed that asset returns are an increasing function of their beta risk, residual risk, and size and a decreasing function of the public availability of information about them. Associating the latter with asset liquidity and following Amihud and Mendelson's [2] proposition that asset returns increase with their illiquidity (measured by the bid‐ask spread), we jointly estimate the effects of these four factors on stock returns.

DOI
10.1111/j.1540-6261.1989.tb05067.x
Volume
44
Issue
2
Pages
479-486
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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