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 Mendelson^1,2,3

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

10.2307/2328600

Volume

44

Issue

2

Pages

479

Sources

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Cite

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