Do Size and Value Premia Vary Across Industry and Market Conditions? Evidence from the Euro Area
Journal of Business and Policy Research
Vol. 10. No. 1. , July 2015, Pages: 96 – 114Do Size and Value Premia Vary Across Industry and Market Conditions? Evidence from the Euro Area
This paper investigates whether value and size premia exist in the Euro area’s industry returns and, if so, what factors are driving them. We use a Garch-M (1,1) model on daily return data from the STOXX market indices for five major industries in the euro area. Our findings show that an industry-specific three-factor Fama and French type model does provide a robust explanation of returns over the period, 2001-2012. While, our results further emphasize the widespread influence of the value and size effects in the Euro market, the pattern, sign, size, and significance of these factors vary widely across different industries and market conditions.JEL Codes: C22. C52. G12.