00Thaler_FM i-xxvi.qxd

CONTRARIAN INVESTMENT 293

Table 8.4

Regression of Returns on Characteristics for All Firms

At the end of each April between 1968 and 1989, we compute for every firm in the
sample the 1-year holding-period return starting at the end of April. We then run 22
cross-sectional regressions with these returns for each formation period as depend-
ent variables. The independent variables are (1) GS, the preformation 5-year
weighted average rank of sales growth; (2) B/M, the ratio of end of previous year’s
book value of equity to market value of equity; (3) SIZE, the end of April natural
logarithm of market value of equity (in millions); (4) E/P+, equal to E/P—the ratio
of previous year’s earnings to end-of-April market value of equity—if E/P is positive—
and to zero if E/P is negative; (5) DE/P, equal to 1 if E/P is negative, and zero if E/P is
positive; (6) C/P+, equal to C/P—the ratio of previous-year’s cash flow to end-of-April
market value of equity—if C/P is positive—and zero if C/P is negative; (7) DC/P,
equal to 1 if C/P is negative, and zero if C/P is positive. The reported coefficients are
averages over the 22 formation periods. The reported t-statistics are based on the
time-series variation of the 22 coefficients.

Int. GS B/M SIZE E/P+ DE/P C/P+ DC/P

Mean 0.180 −0.061
t-statistic 3.251 −2.200

Mean 0.108 0.039
t-statistic 2.167 2.132

Mean 0.185 −0.009
t-statistic 2.140 −1.095

Mean 0.110 0.526
t-statistic 2.029 2.541

Mean 0.099 0.356
t-statistic 1.873 4.240

Mean 0.129 −0.058 0.006 0.301 −0.029
t-statistic 2.584 −2.832 0.330 3.697 −1.222

Mean 0.143 0.009 −0.009 0.280 −0.032
t-statistic 1.562 0.565 −1.148 4.223 −1.625

Mean 0.169 −0.044 0.000 −0.009 0.296 −0.036
t-statistic 1.947 −2.125 0.005 −1.062 4.553 −1.625

Mean 0.172 −0.051 0.016 −0.009 0.394 −0.032
t-statistic 1.961 −2.527 1.036 −1.065 2.008 −1.940