McGraw-Hill

Disentangling Equity Return Regularities
6s
FIGURE 2-1
Cumulative Return to Low Price/Earnings
70
60-
1
EL
Y 30-
j .
5 20-
10 -
0
JAJOJAJOJAJOJAJOJAJOJAJOJAJOJAJOJAJO
1978 1979 1980 1981 1982 1983 1984 1985 1986
Yield, Neglect, Price, and Risk
Yield and zero yield on average were not statistically significant
over this period. However, a clearer picture emerges when Janua
seasonals are examined (as discussed later).
Neglect was a significant effect in both its nake form, where it
added an average of 14 basis points per month, and in its pure form,
where it added 10. Because the neglect effect survives the purification
process, it appears to exist independently of the low-P/E and
small-size anomalies.
We found no significant accumulation of returns to low price
over the period. This is in contrast to previous research onaYve returns
to low price, as well as Reid’s (1982) finding of a significant effect
in his multifactor model. The difference is due primarily tour
use of a more recent sample period. We observed significant naWe
and pure return accumulations from this effect until mid-1983, but