Anomalies and Factors in European Stock Returns

Thomas Frandsen

Student thesis: Master thesis

Abstract

In recent years many anomalies have appeared in expected stock returns the most famous being the value and size anomalies. This thesis investigates different anomalies based on firm-characteristics in the European stock market in the period 2000-2015. It is found that portfolios sorted based on the following firm-characteristics earn anomaly returns measured by a risk-to-reward ratio: beta, volatility, size, MTBV, momentum, ROE, and OP. Furthermore, it is found that 4-factor model consisting of market, MTBV, volatility, and momentum factors capture the main part of variations in expected stock returns in the European market. Therefore, this thesis supports the risk based explanations of anomalies in European stock returns.

EducationsMSc in Finance and Investments, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2016
Number of pages85