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On computing mean returns and the small firm premium

Roll, Richard (1983) On computing mean returns and the small firm premium. Journal of Financial Economics, 12 (3). pp. 371-386. ISSN 0304-405X. doi:10.1016/0304-405X(83)90055-7.

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The mean return computational method has a substantial effect on the estimated small firm premium. The buy-and-hold method, which best mimics actual investment experience, produces an estimated small-firm premium only one-half as large as the arithmetic and re-balanced methods which are often used in empirical studies. Similar biases can be expected in mean returns when securities are classified by any variable related to trading volume.

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Additional Information:© 1983 Published by Elsevier B.V. Comments and suggestions by Gordon Alexander, Kenneth French, Stephen Ross and the referee, Allan Kleidon, are gratefully acknowledged.
Issue or Number:3
Record Number:CaltechAUTHORS:20190501-095527862
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Official Citation:Richard Roll, On computing mean returns and the small firm premium, Journal of Financial Economics, Volume 12, Issue 3, 1983, Pages 371-386, ISSN 0304-405X, (
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:95130
Deposited By: Tony Diaz
Deposited On:01 May 2019 19:00
Last Modified:16 Nov 2021 17:10

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