Background firm specific attributes are unde rstood

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Background Firm-specific attributes are unde rstood to be “the unnamed sources of risk” according to Fama and French. van Rensburg and Robertson (2003) started to identify those attributes which have the ability to explain average monthly returns over a 10-year sample on the JSE It is of extreme importance that the element of risk related to BTM can be incorporated into a returns model either indirectly through a HML type risk factor, or directly in the form of a “return to styles” approach. BTM and Risk IF 2 companies have the same book value, investors will prefer the company with lower risk/uncertainty. Hence the lower uncertainty will have a higher market value. Therefor lower uncertainty will have a lower BTM ratio. Therefor BTM and risk are positively related.
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