Cross-Sectional Estimation of Stock Returns in Small Markets: The Case of the Athens Stock Exchange

34 Pages Posted: 19 Jan 2009 Last revised: 20 Dec 2021

See all articles by George N. Leledakis

George N. Leledakis

Athens University of Economics and Business, School of Business, Department of Accounting and Finance

Ian Davidson

Loughborough University - Business School

George Karathanassis

Athens University of Economics and Business - Department of Business Administration; Athens University of Economics and Business - Department of Business Administration

Date Written: July 16, 2003

Abstract

This study is an investigation into the cross-sectional determinants of stock returns in a small market - the Athens Stock Exchange - where the Fama and French portfolio grouping procedure that is normally used to counter the error in variables problem in estimating beta is problematic due to the small number of stocks. A maximum likelihood technique is applied, similar to that developed by Litzenberger and Ramaswamy (Journal of Financial Economics, 7, 163-95, 1979), which is arguably a better procedure than the portfolio grouping method even for investigating large (developed) markets. A further empirical problem that was addressed was the possibility that the results were being driven by the 'January effect'. The findings for the Athens market suggest that there is only one substantive variable in explaining the cross-sectional variation of market and that is market equity ME (which captures a size effect).

Suggested Citation

Leledakis, George N. and Davidson, Ian R. and Karathanassis, George and Karathanassis, George, Cross-Sectional Estimation of Stock Returns in Small Markets: The Case of the Athens Stock Exchange (July 16, 2003). Applied Financial Economics, Vol. 13, No. 6, 2003, Available at SSRN: https://ssrn.com/abstract=1329066

George N. Leledakis (Contact Author)

Athens University of Economics and Business, School of Business, Department of Accounting and Finance ( email )

76 Patission Str.
Athens, 104 34
Greece
+30 210 8203 459 (Phone)
+30 210 8228 816 (Fax)

HOME PAGE: http://www.aueb.gr/en/faculty_page/leledakis-georgios

Ian R. Davidson

Loughborough University - Business School ( email )

Ashby Road
Loughborough
Nottingham NG1 4BU, LE11 3TU
Great Britain

George Karathanassis

Athens University of Economics and Business - Department of Business Administration ( email )

Athens
Greece

Athens University of Economics and Business - Department of Business Administration ( email )

Athens
Greece

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