1. Ibbotson Data - Chapter 2 Graph 2-1 Wealth Indices of...

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Unformatted text preview: Chapter 2 Graph 2-1 Wealth Indices of Investments in the U.S. Capital Markets Year-End 1925 = $1.00 from 1925 to 2OO4 $20,000 $10,000 Small Company Stocks, \ \ \ 1gttg.:r"* co,J91me',teryo1 \ * " Company Stocks $12,968.48 $2,533.20 t O C . i / Z ieasurv Ells 1 935 Year-end 1 bb ot Son Assoclo$es , " 3to.Ls, bo'$s, ?j'\t "'*J.- a;f \*tio"' poo S Yeotbook 28 SBBI 2005 Yearbook The Long Run Perspective Table 2- 1 Basic Series: Summary Statistics of Annual Total Returns from '1926lo 2OO4 Large Company Stocks 10.4o/o 12.4Vo 2O.3o/o , rh,||ll,l,, , SmallCompany Stocks 12.7 17.5 33.1 ,l,l,,lLrll ,.t Long-Term Corporate Bonds 5.9 6.2 8.6 I h, Long-Term Government 5.4 5.8 9.3 lntermediate-Term Government 5.4 5.5 5.7 I 1,. U.S. Treasury Bills 3.7 3.8 3.1 I lnflation 3.0 3.1 4.3 I I Geometric Arithmetic Standard Series Mean Mean Deviation Distribution-90%o O% gOYo-The 1933 Small Comoanv Stocks Total Retum was 1 42.9 oercent lbbotsonAssociates 33 ::,. r : ' ;: iri: i::: +.... l€- P.l i:: t *. +: F; F ,a. +:. t'al l.::: 6 i g: E A . : rei g. tr, :=; tr Ohapter 7 Firm Size and Return The Firm Size Phenomenon One of the most remarkable discoveries of modern finance is the finding of a relationship between firm size and return.' On average, small companies have higher returns than large ones. Earlier chapters document this phenomenon for the smallest stocks on the New York Stock Exchange (NYSE). The relationship between firm size and return cuts across the entire size spectrum; it is not restricted to the smallest stocks. In this chapter, the returns across the entire range of firm size are examined. Gonstruction of the Decile Portfolios The portfolios used in this chapter are those created by the Center for Research in Securiry Prices (CRSP) at the University of Chicago's Graduate School of Business. CRSP has refined the methodology of creating size-based portfolios and has applied this methodology to the entire universe of NYSE/AMEX/NASDAQ-listed securities going back to 1.925. In 1993, CRSP changed the method used to construct these portfolios, thereby causing the return and index values in Table 7-Z andT-3 to be significantly different from those reported in pre- vious editions of the Yearbooh. Previously, some eligible companies had been excluded or delayed from inclusion when the portfolios were reformed at the end of each calendar quarter. Also, while in prior editions of the Yearbook we used NYSE-listed securities only in the composition of size decile portfolios, starting with the 2001 edition we use the entire population of NYSE, AMEX, and NASDAQ-listed securities for use in the firm size chapter. The New York Stock Exchange universe is restricted by excluding closed-end mutual funds, preferred stocks, real estate investment trusts, foreign stocks, American Depository Receipts, unit investment trusts, and Americus Trusts. All companies on the NYSE are ranked by the combined market capitalization of all their eligible equity securities. The companies are then split into 10 equal-market capitalization of all their eligible equity securities....
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This note was uploaded on 09/27/2009 for the course UGBA 133 taught by Professor Distad during the Summer '08 term at University of California, Berkeley.

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1. Ibbotson Data - Chapter 2 Graph 2-1 Wealth Indices of...

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