Collect the following data for 25 firms from Market Insight.
Ă‚Â a. Book-to-market ra tio.
Ă‚Â b. Price/EPS from operations ratio.
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Ă‚Â c. Market capitalization (size).
Ă‚Â d. Price/Cash Flow ratio
Ă‚Â e. Another criterion that interests you.
Ă‚Â You can find this information by choosing a company, then clicking on the Financial
Hlts. link in the Compustat Reports section. Rank the firms based on each of the criteria separately and divide the firms into five groups based on their ranking for each criterion. Calculate the average rate of return for each group of firms. Do you confirm or reject any of the anomalies cited in this chapter? Can you uncover a new anomaly? Note: For your test to be valid, you must form your portfolios based on criteria observed at the beginning of the period when you form the stock groups. W hy?