THE ABSENCE OF THE BOOK‐TO‐MARKET EFFECT IN THE TAIWAN STOCK MARKET: A DECOMPOSITION APPROACH |
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| Authors: | CHAOSHIN CHIAO WEIFENG HUNG CHUN YAO |
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| Institution: | 1. National Dong Hwa University;2. We wish to thank the editor, Koichi Maekawa, and an anonymous referee for constructive comments. Chaoshin Chiao acknowledges the financial support from the National Science Council of Taiwan (grant #NSC 94‐2416‐H‐259‐028‐). Any remaining errors are our own.;3. Feng Chia University;4. National Chengchi University |
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| Abstract: | This paper examines the absence of the book‐to‐market equity (BM) effect in the Taiwan stock market, applying the BM decomposition proposed by Daniel and Titman (2006 ). First, we do not observe a significantly negative correlation between future stock return and intangible return on research‐and‐development‐intensive firms in Taiwan, which is inconsistent with the US evidence documented by Daniel and Titman. Second, undervaluation of research‐and‐development‐intensive firms possibly leads to the absence of the BM effect. Those firms, most of which have low BM, perform well not only in the past, but also in the future, thereby obscuring the BM effect. |
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| Keywords: | G12 G14 |
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