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PREDICTABILITY OF MARKET RETURNS USING BOOK TO MARKET RATIO

This particular topic is about predictability of market returns using book to market ratio. This

particular ratio is used to calculate return rate from those indexes listed in the S&P 500 index.

Detail data of the history of S&P 500 index starting from 1926 to 2013 have been collected by

the researcher to find out the return and index prices to find out the fluctuations of prices of the

indexes over these years.

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PREDICTABILITY OF MARKET RETURNS USING BOOK TO MARKET RATIO

  1. 1. 1 PREDICTABILITY OF MARKET RETURNS USING BOOK TO MARKET RATIO
  2. 2. 2 Abstract This particular topic is about predictability of market returns using book to market ratio. This particular ratio is used to calculate return rate from those indexes listed in the S&P 500 index. Detail data of the history of S&P 500 index starting from 1926 to 2013 have been collected by the researcher to find out the return and index prices to find out the fluctuations of prices of the indexes over these years. The researcher made a detail review of literature to elaborate the related facts of return from market. The return from dividend and return from Book to market ratio has been compared to determine the changes in rate of return from these two variables. The researcher has also elaborated the various macroeconomic factors that affect the return rates. The macroeconomic factors and the way how these factors have an impact on the return from the indexed companies. Relation between Book to market ratio and future returns from these listed companies are also discussed in the review of the literature. The researcher has also described the reasons for choosing book to market ratio as the variable of return from the different indexed companies. The difference in returns from dividend and book to market ratio is also elaborated. Actually, returns from book to market ratio calculates future return based on the present market value of shares. The positive and negative side of book to market ratio is also discussed in this research. The researcher used research onion to describe the philosophy, design and approach of the research. In this research, the researcher has used analytical design, deductive approach and post positivism philosophy. This research is completely based on secondary data. The researcher gathered the appropriate and authentic data from different available sources. The researcher used these data in proper way without any bias and implemented the data where required. These collected data is represented in tabular and graphical manner and interpreted results based on the findings. The researcher also analysed the data in the best possible manner. Graphs are prepared for analysing different factors like profitable and loss making industries and calculations of mean and standard deviation of these listed industries are made.
  3. 3. 3 At the end of this research, the researcher has provided detailed conclusion about the predictability and applicability of book to market ratio. The conclusions and recommendations are provided by the researcher as per as the problems present in the usage of Book to market ratio. The recommendations are provided to bring improvements in certain negative aspects of book to market ratio. The researchers also described the limitations and the problems faced during the research work. The researcher has kept scope to carry out research on this particular subject i.e. prediction of market returns by using book to market ratio in the future.
  4. 4. 4 Acknowledgement I would like to thank my teachers and professors for their tremendous and continuous support to complete this difficult research job. I am thankful to my research guide for his guidance in this research. Without the help of my guide, this research would have been difficult to complete. I would also thank my family members, friends for their unconditional support and motivation. My friends and family members influenced me a lot to make progress in this difficult research journey. Without the help and guidance of these people, this research would have remained impossible. Thank You Yours Sincerely ________________
  5. 5. 5 Table of Contents Chapter 1: Introduction and background ....................................................................................... 8 1.0 Introduction............................................................................................................................. 10 1.1 Background of the Research................................................................................................... 10 1.2 Rationale of the Research ....................................................................................................... 11 1.3 Research Aim.......................................................................................................................... 12 1.4 Research Objectives................................................................................................................ 13 1.5 Research Questions................................................................................................................. 13 1.6 Research Hypothesis............................................................................................................. 13 1.7 Significance of the Study........................................................................................................ 13 1.8 Structure of the Dissertation ................................................................................................... 14 1.9 Summary................................................................................................................................. 15 Chapter-2 Literature review.......................................................................................................... 16 2.0 Introduction............................................................................................................................. 16 2.1 Previous research works: ........................................................................................................ 16 2.2 Conceptual framework:........................................................................................................... 17 2.3 Relation between market returns and book to market ............................................................ 17 2.4 Macroeconomic environment affecting stock returns predictability ...................................... 19 2.5 Fundamentals of Book to Market ratio ................................................................................... 25 2.6 Relationship between Book -to market ratio and future return............................................... 26 2.7 Elaborating the difference between the returns based on Book to Market ratio and Dividend payment......................................................................................................................................... 26 2.8 Reasons for choosing Book to Market ratio ........................................................................... 27 2.9 Positive features of Book to market ratio ............................................................................... 28 2.10 Negative features of book to market ratio............................................................................. 29 2.11 Comparison between previous research and existing research work: .................................. 29
  6. 6. 6 2.12 Summary:.............................................................................................................................. 30 Chapter-3: Research Methodology ............................................................................................... 31 3.0 Introduction............................................................................................................................. 31 3.1 Method Outline ....................................................................................................................... 31 3.2 Research Onion....................................................................................................................... 31 3.3 Research Paradigm/Philosophy .............................................................................................. 32 3.3.1 Justification for selecting positivism ................................................................................... 33 3.4 Research Approach................................................................................................................. 33 3.4.1 Justifying the use of Inductive approach ............................................................................. 34 3.5 Research Purpose .................................................................................................................... 35 3.5.1. Justification for Analytical Design ..................................................................................... 35 3.6 Research strategy .................................................................................................................... 36 3.7 Methods of Data collection..................................................................................................... 36 3.7.1 Secondary data collection .................................................................................................... 36 3.7.2.2 Qualitative Data collection................................................................................................ 36 3.8 Secondary Data Analysis ........................................................................................................ 36 3.9 Ethical considerations ............................................................................................................. 37 3.10 Time schedule considered to perform research (Gantt chart) ............................................... 37 3.11 Summary............................................................................................................................... 38 Chapter 4: Data analysis and Findings.......................................................................................... 39 4.1 Introduction............................................................................................................................. 39 4.2 Critical evaluation of the issues related to the market returns of the S&P 500 indexes under S & P 500 indexes ............................................................................................................................ 39 4.3 Secondary Data Analysis ........................................................................................................ 81 4.4 Summary................................................................................................................................. 82
  7. 7. 7 Chapter 5: Conclusion and Recommendation............................................................................... 83 5.1 Conclusion .............................................................................................................................. 83 5.2 Linking objectives with Findings and review of literature ..................................................... 83 5.3 Recommendations................................................................................................................... 85 5.4 Limitation of the research....................................................................................................... 86 5.5 Future scope of the research.................................................................................................... 87 Reference list................................................................................................................................. 88 Appendices:................................................................................................................................... 93 Appendix 1: Graph showing the correlation and beta of S&P 500 (1900-2010).......................... 93 Appendix 2: Graph showing the credit position of S&P 500 and Hedge funds (1990-2010) ...... 93
  8. 8. 8 List of Figures Figure 1: Dissertation Structure .................................................................................................... 14 Figure 2: Conceptual framework .................................................................................................. 17 Figure 3: Research Onion ............................................................................................................. 32 Figure 4: Research Philosophy ..................................................................................................... 33 Figure 5: Research Approach........................................................................................................ 34 Figure 6: Research Design............................................................................................................ 35 Figure 7: Graph showing the growth rate of the profitable industries for the last 1 year to present ....................................................................................................................................................... 45 Figure 8: Graph showing the growth rate of the profitable industries for the last 1 year to present ....................................................................................................................................................... 51 Figure 9: Graph showing the trend of growth and decline of the related industries..................... 57 Figure 10: Graph showing the index of S&P 500 index from 1926 to 1966 ................................ 69 Figure 11: Graph showing the index of S&P 500 index from 1968 to 2013 ................................ 80
  9. 9. 9 List of Tables Table 1: Gantt chart....................................................................................................................... 38 Table 2: Table showing the growth of the profitable industries of S&P 500 Index ..................... 41 Table 3: Table showing the statistical data of the profitable industries listed in S&P 500 .......... 43 Table 4: Table showing the decline of the loss making industries of S&P 500 Index ................. 47 Table 5: Table showing the statistical data of the loss making industries listed in S&P 500....... 49 Table 6: Table showing the decline of the loss making industries of S&P 500 Index ................. 53 Table 7: Table showing the statistical data of the loss making industries listed in S&P 500....... 55 Table 8: Table showing index, book to market and dividend yield of S&P 500 indexes (1926- 1966) ............................................................................................................................................. 60 Table 9: Table showing index, book to market and dividend yield of S&P 500 indexes (1926- 1966) ............................................................................................................................................. 61 Table 10: Table showing index, book to market and dividend yield of S&P 500 indexes (1926- 1966) ............................................................................................................................................. 67 Table 11: Table showing index, book to market and dividend yield of S&P 500 indexes (1967- 2013) ............................................................................................................................................. 71 Table 12: Table showing index, book to market and dividend yield of S&P 500 indexes (1967- 2013) ............................................................................................................................................. 77
  10. 10. 10 Chapter 1: Introduction and background 1.0 Introduction According to the statement of Basu (2008), the market returns can be defined as the return in the capital investment in terms of stock market. Market return can be return from trading or can be dividends provided by a company at regular basis to its shareholders or the market holders out of the profits earned by the company in the particular part of a year. Market returns can be evaluated through the dividends provided by any certain firm or company in every quarter of the year in which the company making the profits usually shares a certain portion to the market shareholders to gain more profit as a return (Barber and Lyon, 2010). These are never fixed and are very dependent on the market and its current values. The market return changes from holders-to-holders of the market investors depending on the market risks that further depend on the market analysis. The book-to-market ratio is the ratio, which can be evaluated to compare the book value of a company or a firm by comparing its return value with the current market value. By doing this, the company can have an idea of its stock value in the market. This research will evaluate that stock market value and returns by comparing it with the current scenario in the USA Stock Market. Jiang and Lee (2007) opined This research is based on the predictability of the market returns using book to market ratio that is frequently used by the investors of those companies listed in S&P 500 index. This ratio helps to find out how much return a particular index can provide to the investors in future in contrast of the present index price. 1.1 Background of the Research According to the finds of Basu (2008), the Predictability of a stock market is evaluated by the future stock prices using various statistical tools, charts and focusing on price movements. Return profitability is also dependent on the pattern of investment made by the investors and the capacity to take make investment in those shares bearing high risks. According to Darner (2008), market returns are highly dependable on the market risks, which could be positive or negative as a return. Nowadays, there are some derivative instruments that are used to maintain a graph, related to the up down of a market ratio in a regular basis. These instruments help the investors
  11. 11. 11 in hedging which informs the company about the reduced risks associated with the market. According to Jiang and Lee (2007), Different corporate sector companies are using these tools in order to gauge their stock market values and to evaluate the ratio by using the book-to- market ratio so that the company can have a predictability of the market returns. This particular topic is chosen by the researcher to find out the reason why calculations of returns using Book to market ratio failed in recent times. Alaska (2010) opined book to market ratios have provided nearly exact results regarding the return, but since the major crisis in the stock market, the predictions have turned negative. 1.2 Rationale of the Research What is the research issue? The issue in this research is about the positivity and acceptability of Book to market ratio regarding return predictions. Fama and French (2015) sated returns from companies listed in S&P 500 have changed at present. Previously, this ratio used to make nearly accurate predictions but in recent times, majority of these predictions have turned out to be negative. The high stock return issues of a certain corporate firm trigger the equity issues in the stock market that are mainly driven by the consideration of the market timings. The issues are regarding equity shares of the companies listed in S&P 500 index. According to Griffin and Lemmon (2009), returns are flexible in case of equity shares and that has created the problem regarding return after the recession. It mainly arises when there is an issue in stock markets through various accessibilities to the capitals and the investors based on the gains that the company would avail in the future market. The equity problem generates the legitimate certainty about the survival of the current economic system of a certain corporate company. This problem strongly responds to the spikes of the corporate sector holdings, which will significant to the relation of the existing share or market holders. Why is it an issue? It is an issue for the certain company, which is facing the equity problem because the company relatively gives the compensation for the higher rates to the market equity. This makes an organization far less guaranteed which, in worse, results in the downturns. Lam (2009) stated that companies unable to operate without investment have to shut down its operations fearing
  12. 12. 12 losses. If proper returns are not received, investors also prefer to stay out from making investments. A risk free market generate the trust and bonding of the company in future for a long term basis as because of the low chances of downturn in the income of the company that follows a certain pattern in the return of the market stock prices. Suppose the market return of a company is 15% for a certain year and the risk free rate over that particular period of time is 6 % , then, the equity risk will be 9% for that in that year. Why is it an issue now? It is an issue now because as per the equity risk premiums in the market, a company can certainly understand the existence of a company in the future market. Thus, it puts the company to invest in high risk to cover up the compensations, which is to be given to the market holders for the loss. Thus, the equity problem is an alarming issue for the company because it can be a profit for some firm by giving high stock returns. Lau et al. (2009) stated in addition, in few firms, it can be a huge loss where the firm needs to cover up compensations, which takes place with the issue in the market. What could this research shed light on? This research sheds lights on predictability of stock market returns in comparison to the current market scenarios of the USA stock market. Using Book to market ratio and the issues and challenges any corporate firm listed in S&P 500 faces related to the stock returns are easily understood. The researcher has taken the help of secondary research to understand the challenges and issues that any investing firm faces from the different market returns by providing certain recommendations and suggestions in order to resolve the challenges. The purpose of this research is to find out predictability of market returns and its effectiveness and acceptability among the investors. Book to market ratio has lost its effectiveness regarding prediction of positive returns. 1.3 ResearchAim The aim of the research is to find out the predictability issues of the market returns by using the book to market ratio in which the return defines the amount, which is received by market holders as a return of their capital investments in terms of profit or loss. It is the return, which is
  13. 13. 13 generated by stockholders or the market holders out of the market. It is to evaluate the empirical results, which are consistent with the market capitals in an efficient way. 1.4 ResearchObjectives The researcher is going to conduct the study in order to meet the following objectives:  To critically evaluate the issues related to the market returns of the different firms in related to the industry in context to the market value.  To suggest the suitable recommendations to the firms to solve the related issues related to the ratios of the market value 1.5 ResearchQuestions The researcher looks after the following list of Research Questions:  How efficiently the does the predictability of the market returns has an impact to the certain firms for boosting up the market ratio?  What are the issues related to the market returns of the firms while using the book to the market ratio? 1.6 ResearchHypothesis H0: Market ratio is important for the predictability of the market returns H1: Market ratio is not important for the predictability of the market returns. 1.7 Significance of the Study The study, which has been done by the researcher gives the importance of the market, returns in terms of the market ratios in the stock market analysis. The market returns provides the company about its existence in the future and the company gets an idea about the next investments. Investments are done by calculating the current market values by using the book to market ratio. In fact, the company year turn over depends on the stock market returns as because of the equity market, which gives the company a profitable return or at times, the loss. Therefore, the stock market returns is a calculation chart, which helps the company to maintain its business with the
  14. 14. 14 market values and returns. This entire research can be helpful for the learners in future those, who are willing to further carry out this research. The issues that have been determined by the researcher and the recommendations suggested according to the issues will help the corporate companies to resolve the problems faced in the USA market. These suggestions if followed can give the companies a better future. 1.8 Structure of the Dissertation Figure 1: Dissertation Structure (Source: As created by author) Chapter 1 • Introduction of the topic, the research aim, the significance of the topic, its objectives along with its questions. Chapter 2 • Developing a appropriate Literature Review Chapter 3 • Developing a Research Methodology Chapter 4 • Data Findings and Analysis Chapter 5 •Recommendations and Conclusions
  15. 15. 15 1.9 Summary The entire chapter focuses on the creating the backbone of the study which is based on the given topic, which is, determine by the rationale taken for the research. The dissertation has been conducted based on the research points. The entire dissertation gives a clear objective based on which the researcher works accordingly. The researcher further looks after the objective and questions of the research, which can be further taken by the certain corporate companies to resolve its existing issues. The body of the dissertation is clearly described by the structure of the dissertation drawn above by the researcher, which is elaborated in the next coming chapters. By taking the reference of the market ratios and market values of few corporate sector companies, the research has been done to evaluate the predictability of the market returns.
  16. 16. 16 Chapter-2 Literature review 2.0 Introduction The term literature review is the entire representation of the subject on which a research is to be carried out. Review of the literature needs to be inclusive of the present knowledge of the analysis of findings along with proper uses of the related methodology. This particular research is about the predictability of the market returns using book to market ratio. For making a proper review and completing the entire research in the most effective manner, the researcher has identified the related theories and carried out proper analysis on these theories and models. It is necessary to posses usual knowledge about means of return from stocks have been used and the application of book to market ratio to make a prediction about the return. The entire research is about the prediction of return provided by the companies by using book to market ratio. The usage of Book to market ratio is one of the major means of calculation of returns received from the shares listed in the S&P 500 index. Yau (2012) stated in USA, the usage of Book to market ratio is one of the mostly used return predictability calculation done by investors for S&P 500 index. 2.1 Previous research works: Previously research on this particular topic has been carried out and those researchers made analysis of the present data and the theories. As per the views of Walford (2008), researchers have explained how rate of returns have differentiated with prior difference in the level of risks involved. The inclusion of the different types of pricing models was also included regarding finding out the returns. Kellermann et al. (2013) opined that book to market ratio have the prospective of identifying the portfolios having capacity to produce higher rate of return. Alongside, this calculation has also produced negative results in some cases. Previous researches have tried to explain the effect of available market risk changing the returns in future.
  17. 17. 17 2.2 Conceptual framework Figure 2: Conceptual framework (Source: As created by Author) 2.3 Relation between market returns and book to market Returns generated by the investors in the stock market are call as market returns. Return can be in the form of profit through trading or in form of dividends given by company to the shareholders. Market returns are not fixed and are subject of market risks (Yau, 2012). The term market return is defined as the rate of the return that is going to be earned in the course of the entire investment that has been made in favor of the company. The rate of the return has been collected and counted for the span of the years like 5 or more. According to Nguyen and Schuessler (2014), investors generally find out the rate of return for a long period of time. The Macroeconomic environment affecting stock returns predictability Detail analysis of the macroeconomic factors that changes rate of return Fundamentals of Book to Market ratio Relationship between Book -to market ratio and future return Relation between market returns and book to market
  18. 18. 18 reason behind doing so is to find out the financial stability of the company for the last few years. There are different types of the return like the average return; it is the return that the company has provided for the period of the last 3 to 5 years. Parigi et al. (2013) discussed it helps to find out the status of the profitability or the loss that the company has been incurring in the following years. The other type of return is the index performance return where the price of the bonds issued by the companies is taken into account during the different parts of the year. Here, the quarterly performance rate is taken into account. According to Gulen et al. (2011), the other type of return that is available in market for the investors is the historical return. In this type of return, the rate of the return that has been provided by the particular share for a long period of time is taken into consideration. By dividing the year in to 3 parts the rate of the return provided in the 3rd, 6th and the 12th month is generally taken into account. Liew and Vassalou (2009) noticed rate of return for every company is listed in the stock index. The price of the share is calculated on the basis of the price of the share per $100. In this particular method, the rate of the return is measured in the terms of the T-Bills, Stock Bills are taken into account, and the entire rise and the fall of the share prices are found and are published in the share option market. Book to market is the ratio that is calculated by the firms and the investors to find out the market value of the shares in the current or the upcoming years. As per the views of Nguyen and Schuessler (2014) while making the calculation of the book to market ratio, the value of the shares of the company is taken into account. The method of finding the entire value of the shares is done through the process of capitalization. For this purpose, the market and the book value of the firm is taken in to account. Edwards et al. (2013) described factors like the market returns and the book to market has a close relationship as both the factors have the common connection of depicting the return that the particular bond is going to deliver. According to Somekh and Lewin (2011), the general concept of the factors is to provide the return rate, so that the company is able to make the prediction in relation to the return that the company is going to get and the future of the investments that the company might have or make the loss in respect to the present year. Parigi et al. (2013) stated from these calculations, the stakeholders of the company will be aware of the position of the company in terms of the financial condition and the shareholders of the company will be able to predict the return on the invested money.
  19. 19. 19 2.4 Macroeconomic environment affecting stock returns predictability According to Yau (2012), macroeconomic environment factors which affect stock return predictability are like inflation, money stocks, aggregate output, interest rates, and ratio of consumption to wealth and unemployment rate. As per the views of Alaska (2010), each and every economy is build up with the twin factors of Micro and macro economics. The micro economics is oriented towards the benefits and the limitations that the individual or the working bodies like the private and the public concerns. Piotroski (2007) noticed that macroeconomic factors of the economy is driven towards the return of the stock and the benefits and the problems that the shareholders are about to receive in the following years. Darner (2008) opined macroeconomic factor of the economy is inclusive of the key factors like discrimination of product prices, conditions of different markets, and rate of investments and amount of savings that the company is going to receive is considered to be the factors that have the potential to affect the rate of the return in the favor or against the company along with the considerations of the other market influencing factors. As per the views of Harrison et al. (2011), various macroeconomic factors that play an important role in regarding the rate of the returns from the investment are the rate of unemployed people, fluctuating rate of the interest output of the different types of materials that has been produced in the entire economy during the particular financial year and the rate of blockage stocks in the economy along with rate of confidence of buyers across the economy regarding the performance and usage of particular type of products. Onwuegbuzie and Leech (2009) opined different factors and role of factors regarding rate of returns of various stocks are discussed as follows: Rate of Unemployment- Unemployment rate of a country determines the strength of the entire country regarding the financial and the profit earning status of the economy. Truscott et al. (2010) noticed huge rate of the unemployment count states that the economy is rather weak in terms of the performance especially in the sector of the economic development and also states that the internal strength of the economy is poor regarding the criteria of creating opportunities. According to Yau (2012), high employment demonstrates that the internal functioning and the progress of the business cycle are favorable in all aspects. Fluctuating rate of interest- The higher rate of interest demonstrates that the economy has been in the downward side in terms of the performance. According to the views of Vargas-Hernajndez
  20. 20. 20 (2012), lower rate of interest means that the economy has been able to recover all the debts and no more further debts are to be made by the country to meet all the internal financial affairs. When the rate of the interest is higher it demonstrates that the economy has got shortage of the liquid money to meet the obligations. Production- As stated by Walford (2008), production of different types of materials in the particular year. In general, the production or the rate of the output depends on the factors like demand of the products, and the diverted rate of the returns and the factor of income determination and when the investors are willing to receive the nominal earning for the purpose of making loss in the course of the investment. Detail analysis of the macroeconomic factors that changes rate of return Inflation: Inflation is defined in economics as an increase in the pricing level of goods and services for a certain period of time. The relation between return and inflation is one of the most debatable issues in academy. Available information regarding the future values of inflation is shown on the nominal rate (Cenesizoglu, 2011). As there is a strong connection between common stock return and inflation, it can be used to predict the future. There are several reasons for the occurrence of inflation in the economy. Inflation is termed as the phenomenon, where prices of the goods produced and sold within the limits of a country increases. As per the views of Parigi et al. (2013), Inflation can also take place when, usage of money becomes lower than the rate of the existing amount of money and supply of money to people of a particular country. In case of increase in the level of the price, the buying power of the currency gets lower than before. Piotroski (2007) opined that Inflation is harmful for a country and also to the residents. The situation when people are unable to consume goods with a certain percentage of money, it indicates that the value of that currency has fallen. Inflation makes the situation worse regarding making investments. Actually, when the value of a currency falls, the investment will bring less return in context of the amount of money invested. The rate of return can vary up to a large extent due to inflationary factors. According to Adam and Goyal, (2008), economic experts, the main reason of inflation is due to higher rate of unused liquid money in the entire country. Barber and Lyon (2010) noticed in this situation, the price chart of all the materials keeps increasing and the capability of the buyers to buy a particular
  21. 21. 21 product keeps falling. In economic terms, there are two types of inflation- demand push and cost push. Though inflation is harmful for an economy, there are few ways to control inflation. The ways to fight inflation are-  Controlling the rate of free supply of money  Controlling prices of materials having high demands  Keeping the payments of the workers in different sectors unchanged  Government initiatives like increasing tax rate and interest rate to stop the rate of demand (Amit and Livnat, 2008). Money stocks: The relationship between common stock and money has got a considerable attention for a long period of time (Menzly and Ozbas, 2010). The increment in money supply tends to increase the common stock price. Cenesizoglu (2011) indicated that money stock has explicit power. Money stock has both in-simple power and out-of-simple predictive power in different countries. The term money stock means availability of assets in an economy during a specific period. The relation between the stock of money and rate of inflation is quite interrelated. As per the views of Dennis et al. (2009), in cases, when the rate of money supply is higher, the price becomes higher due to minimum usage of money for purchasing any product. To ensure that an economy is not affected by inflation, the central banking institutions must check the supply of money. As money is used to purchase the majority of items available, the other mediums of purchase (like costly metals) are not considered for causing inflation. Curcio et al. (2003) opined that major impact in the price level of all commodities sold is caused by money supply in that economy. Not only liquid or usable money, the amount of money saved in bank accounts are also regarded as money supply. The rate or amount of money supply is decided by FRP (Federal Reserve Policy) in USA. Lam (2009) opined these different types of money are described as M0, M1 depending on the pattern of the money hold. Another term used frequently regarding the convertibility of the currencies is “Narrow Currency”- these can be transferred in to cash at any moment as per need of users and account holders. When supply of money is less, people borrow money by paying higher rates of interest and thus people keep away from investing. According to Nguyen and Schuessler (2014), less amount of investment will make companies to stay away from investing and thus the rate of operation of the companies become lower and the return to the investors are also less.
  22. 22. 22 Aggregate output: There are two types of approach which try to explain the relationship between returns and aggregate output. According to Yau (2012) first explanation evaluated that common stock returns and output are related through maturity premium. The second explanation is based on two theoretical models. They are mean of reverting output and life-cycle payment income hypothesis. Piotroski (2007) stated the definition of the term aggregate output is the net quantity of the materials produced and is ready to be supplied in the hands of people for usage. When particular products are ready to be used by the people, and demand for those products are high, it makes an indication that the economy is all set to be enjoying a positive growth factor. According to Cameron (2009), in normal economic sense, when the rate of goods produced in an economy during a particular period of time is higher, it can be said that the country is showing all the signs of better performance. When the factor of GDP is taken into consideration, the market price of the products is taken into consideration. As per the statement of Menzly and Ozbas (2010), when a product is manufactured and sold inside the boundary of the country, the services provided by the residents of the country is measured and at the same time, destruction caused in the natural resources of the country is also taken as a harmful factor. Zhang (2013) opined total output, which is also termed as aggregate output is defined as the total amount of the goods produced without destroying the valuable resources of the economy or the country. Interest rates: There are two important research investigation related to the relationship between interest rates and returns on common stocks. First takes interest rate as good proxy for the expected inflation and use them to analyze the relation between returns and inflation. Second investigation reveals that variation in stock is tracked by a default premium variable and a term premium variable, which are formed from interest rates. Walford (2008) stated that interest, is a common term used in the section of lending or borrowing money from different sources like financial institutes or from non financial bodies. The term interest means that additional amount of money that the borrower needs to pay to the lending body (financial and non- financial institutions and even to person) in addition to the principle sum. According to the views of Kang et al. (2010), rate of interest depends on the condition of an economy. When the economy is in better financial state, the rate of the interest is generally lower. It signifies that the flow of money or the availability of money is adequate in the hands of the people. When people have adequate money in hands, normally the rate of borrowing is less.
  23. 23. 23 This indicates a healthy economy. Cenesizoglu noticed (2011) when people have less amount of money in hand or is unable to make use of money, people becomes prone to borrow money to meet demands. In this type of situation, the lending institutions also charges higher rate of interest. Piotroski (2007) stated that banks charge higher rates of interest when the economy is in shattering condition and is running out of money. In situations of economic downswing, the rate of the interests is quite higher and the well developed economies always maintain a check in the rate of interest for controlling the inflation rate. In case of increasing the rate of investment in the economy, the rate of interest is lowered by the banks (central Banks) of the country to attract people towards making investment. According to Kellermann et al. (2013), fluctuation of rate of interest in an economy especially in macroeconomic factors of the country, it can create a situation, where the price of the shares can get raised by high amount. Excessive rate of credit can also increase share prices. Ratio of consumption to wealth: Aggregate consumption, asset holdings, and labor are interconnected. They may deviate from each other for short periods and they can be used to predict stock market variations for a short period of time (Cenesizoglu, 2011). In economical context, the consumption of wealth is confined to the amount of the asset held during the particular year. This ratio is used to measure the rate or amount of return that owner of these wealth is going to get from these wealth. According to Jiang and Lee (2007), the wealth possessed by human is not confined to the wealth, generally termed as fixed assets like building, land or any valuable or costly metals like gold, silver etc. The assets are also in the forms of different securities or bonds issued by the government or the different investment tools like the commercial papers. Fama and French (2015) opined it is seen that the rate of the expenses made by people is higher when the wealth in hold is higher. When the discussion is about the wealth consumption by human, there are two types of wealth, persisting in the frame of the human wealth. These two types of wealth are financial wealth and the wealth related to housing. According to the studies of Basu (2008), people of USA are prone to increase expenditure in accordance to the increase of wealth consumption. When the wealth consumption ratio is considered in case of making investment in share market, it is concluded that people having more wealth in hand do have the opportunity to increase the rate of investment. Curcio et al. (2003) opined in actuality, the rate of the investment is
  24. 24. 24 dependent on the capacity of the investors. When the investors have the capacity as well as financial power to invest, these people have the capacity to bear the involved risk of the market, investment rate increase at a higher rate. Unemployment rate: Employment rate, unemployment rate, work hours, and hourly earnings affect the stock marketing enormously. Zhang (2013) indicates that there is a statistical significant relationship between unemployment and returns. The level of employed and unemployed people is a factor that makes the rate of the investment higher and lower. In countries where the rate of employment is higher, it suggests strength of the economy. According to Dennis et al. (2009), it is found, that if the rate of unemployed people is more in an economy, it suggests that the economy is not progressing. Rather it demonstrates that the economy have some problems in the financial and the operational structure. According to the investors, the economy that has huge rate of unemployed people suggests weaker economic situations and signifies that full utilization of the resources especially human factors have been lower than usual. According to Barber and Lyon (2010), unemployment and economic recession has a common link. In most of the situations it has been observed that countries that are affected by recession have not been able to employ more people and the generation of working environment is lower. When there is a higher rate of unemployment or companies indulged in leaving out more workers, it suggests that unfavorable condition of the economy is showcases and it is totally non advisable to invest in this scenario. As per the views of Penman et al. (2009), for last few decades, it has been noticed that due to unemployment the share prices have fallen. The rate of the investment declined as the investors found the economy unfit to make investment. In case of S&P 500 index it was seen that rate of the investment was affected during the periods of low rate of unemployment. During this type of economic conditions, the investors choose not to invest due to the fear of getting minimum return as the price of the shares keep on rising. According to Piotroski (2007), during this type of situations, the investors and the share market holders are unable to realize the factors that would uplift the economy and prefer not to take any risk regarding investing in the companies. In this type of situations, the risk factor becomes high and the preference of shareholders are mainly on the shares that has lesser risk but are going to yield less profits. Lau et al. (2009) argued that less risky bonds are preferred due to the factor that the investors do not face the situation of making
  25. 25. 25 losses and do not get adequate return as well as losing the principle amount of the invested money. According to Griffin and Lemmon (2009), after making a brief and detailed study of these macroeconomic factors that changes the rate of the interest of the investments made in favor of the companies. These macroeconomic factors do play an important part in determining the rate of the interest and rather to say specifically rate of returns from investments. So, before making any investment, investors make a close study of these macroeconomic factors and then take the decision regarding making investment. Lau et al. (2009) opined when Book to market ratio is considered by investors regarding return, it is observed that most of the times have the results are in negative values. It states that maximum number of negative returns from S&P 500 index over the last few years have resulted in decreased number of investments. Actually Book to market ratio is about calculating the rate of return in future from a particular index after comparing the present book value of the index. 2.5 Fundamentals of Book to Market ratio In USA, the book to market ratio is considered as one the mostly used and better consideration factor of the book to market ratio. Piotroski (2007) argued that choice of investing depends on book to market ratio of the different industries listed in the S&P 500 index. The rate of book to market ratio is considered as an important parameter before investing. The companies having higher book to market ratio, is considered to be inexpensive for investing. According to Avery et al. (2011), while making an investment, the first and foremost criteria checked by investors are return rate and the level of profitability that a particular index is going to fetch in future. The main contrast is made between the present price of the index and what the price will be after a certain period of time. Before investing, the investors always check the category of the indexes. The stocks having higher rate of growth in the recent years, is mostly preferred by the investors. Walford (2008) noticed that measurement and prediction of risks involved in the stocks are also considered by analyzing the book to market ratio. It has been observed that the indexes with low Book to market ratio provide higher rate of return. The factor of risk is also considered while calculating the book to market ratio. Actually, it has been observed that the indexes having maximum risks are generally confined towards generating
  26. 26. 26 higher rate of return, and can also incur loss in a very less time. As stated by Jiang (2009), risk factor is also one of the important factors considered by the investors while making an investment. The main performing criteria regarding the calculation of the change and swing in the price of the shares are depicted by calculating the Book to market ratio. 2.6 Relationship between Book -to market ratio and future return The rate of the future generation of return and the Book to market ratio is positively related with each other. According to Truscott et al. (2010), price of stocks are also indicated and fixed by taking a look at the book to market ratio. When figure of book to market ratio is low, it states that share prices will be comprehensively higher. It is just the opposite when book to market ratio is high and the price of the shares are comparatively lower. According to Walford (2008), apart from book to market ratio, return rate is also dependent on the factor of the earning and the profit earned by the company during the operations in that particular financial year. The companies listed in the S&P 500 index are also rated by different rating agencies. According to the views of Zhang (2013), the ratings of the companies listed in the index, and considering the Book to the market ratio of the listed securities, the investors take decision regarding making an investment in the specific industries. Yau (2012) demonstrated in recent times, the industries like Information Technology, energy, and the petroleum industries are the leading player of the S&P 500 index. Returns have been higher of these industries due to the major success regarding earning of profit. Darner (2008) argued that these stocks are generating higher returns since the last five years and positive predictions regarding continuation of the present rate of return has been made for these industries. 2.7 Elaborating the difference between the returns based on Book to Market ratio and Dividend payment In general, the investors are to receive the return from the investments made in favor of companies. The companies also provide returns to the stakeholders out of the profits earned. This excess return provided out of profit is termed as dividend. Book to market ratio is also the parameter to find out the return amount but in a different way. According to the words of
  27. 27. 27 Onwuegbuzie et al. (2009), book to market ratio is used to find out the returns from the indexed shares comparing to the present value of the index at present. The rate of return when calculated by using Book to market ratio and dividend payout ratio will generate separate return value. The dividend is paid when a stakeholder invests in a company directly or provides financial assistance. As per the views of Walford (2008), book to market ratio is calculated when investment is made through the stock exchanges in which the shares are listed. When the capacity of finding out or prediction of returns is made by using book to market ratio, the results are quite effective and nearly correct. As argued by Kang et al. (2010), it has been also observed that negative return predictions too have come using this particular tool. When book to market value is considered, the results are achieved by finding out the expenses that are to be made by the company in the future years. Actually, the rate of profit from those investments (cash flows) is calculated by making predictions. The index will be termed as profitable or positive return is indicated, when those future cash flows are going to generate profit for the company. According to Harrison et al. (2011), level of positive cash flow can be transformed into negative data finding if the future cash flows are not made and the companies start paying discounts and make delay in making the utilization of the cash flow. 2.8 Reasons for choosing Book to Market ratio In some cases, return rates are predictable. Dividend payout rate is sometimes known to the investors. Avery et al. (2011) opined the reason for knowing the return rates is due to pre declaration of dividend amount by the companies to its shareholders. But in USA, the use of book to market ratio for determining future returns came into use since late 60’s. While measuring the return using book to market ratio the index returns are tallied with the changing returns when measured with the fluctuation of time series analysis. Lam (2009) stated, it is well known to the investors that return rate will increase if the price of the shares increases over a period of time. With the help of book to market ratio, investors can predict one year based returns. The indexes having same weighted value, are compared based on the dividend yield and book to market ratio. So starting from the year 1926 till 2013 it can be seen that return rate from these two return demonstrators are different in all aspects for same weighted indexes.
  28. 28. 28 According to Gulen et al. (2011), if the return for these entire years is estimated, then it can be observed that returns have fluctuated a lot in these years due to market volatility and presence of risk factor. The reasons for choosing this variable Book to market ratio to determine market returns of the stocks having variation in all its cross sections. The return rate is calculated by finding out the expected amount of cash flows of the listed companies. The relationship between future return and book to market ratio is usually positive in most of the times. Harrison et al. (2011) argued, even the coefficient between book to market ratio results and dividend yield is positive is majority of the cases starting from 1926 to 2013. The return using book to market ratio is determined by dividing the possible expenditures of the indexes by present value of the index. 2.9 Positive features of Book to market ratio The term book value is demonstrated by the difference in the value of the assets and the total remaining payouts. As argued by Alaska (2010), it is a common fact that securities with lesser risk are mostly preferred by the investors. The reason behind this preference is because of less chances of earning profits in short time. People interested to make investments for a longer period prefer to invest in the less risky bonds. Lam (2009) opined when investors receive higher rate of returns, they become interested in purchasing riskier bonds in order to earn profit. The positive features of Book to market ratio are discussed in brief-  Future estimation of return rates that proved to be positive in many cases.  Predicting the position of the economy as well as the index.  Helps the investors regarding making investments in particular industry or company listed in S&P 500 index.  Help to know past records regarding rise and fall of particular indexes in the particular index S&P 500 (Avery et al. 2011). Fama et al.(2010) opined though several positive factors are present in calculation of Book to market ratio, there are several other difficulties or limitations present that has always questioned the acceptability and accuracy of this ratio to predict future returns from S&P 500 index.
  29. 29. 29 2.10 Negative features of book to market ratio Gulen et al. (2011) opined all predictability ratios are comprised of different negative aspects. All ratios are calculated to find out positive and negative features of all market results. Ratio analysis helps to take precautionary measures regarding any persisting risks in return portfolio. In case of persisting economical issues and frequent downswings in share prices, the results derived previously from calculation of market ratios can change up to a large extent. Liew (2009) argued that these ratios are only precautionary objectives regarding taking protection from loss making in the share market. The negative features of Book to market ratio are as follows:  Huge differences in returns noticed as per as the calculations done using Book to market ratio.  Non acceptability of Book to market returns for a long time by investors.  No predictions were separately given by Book to market ratio before the huge market crash in 2008 (Cameron, 2009).  Most of the industries listed in S&P 500 have failed to perform as per the predictions of Book to market ratio (Penman et al. 2009). 2.11 Comparison between previous research and existing research work: The previous researches on this particular topic, predictability of market returns using book to market ratio have described all the positive features as well as the negative features of this predictability calculation. Calculation is carried out by collecting all the prices of stocks. The previous researches have failed to discuss the positive and the negative features of the book to market ratio, and how much difference is there in case of returns from dividends and book to market ratio. In the past researches, the researcher tried to elaborate the relationship between book to market ratio and changes in returns. Alaska (2010) noticed that relationship has been stated clearly and in this research, the relationship has been clearly stated. The related researches were carried on based on the stock prices of companies listed in S&P 500 index. Returns were calculated for future based on the stock prices of those years when researches were carried out. In this research, the researcher opted to use rate of the stocks listed in S&P 500, starting from 1926 till 2013. The returns are predicted and showcased in terms of monthly, half yearly and annual returns.
  30. 30. 30 2.12 Summary: The summarization part of the literature review states how the researcher has taken up all the relevant data and information useful in this research and applied in the course of the research. Researcher added all relevant and required information and records of returns availed from S&P 500 index. All factors affecting return rate along with the macroeconomic factors affecting returns are discussed and aligned with the research topic. It clearly shows that, share prices do not increase only because of increase in the level of profit but also on certain economic factors of the country and different policies adopted by the government related to financial adjustments and adopting and abolishing preexisting or most preferred policies regarding financial strength of the country. The share prices are also subjected to fall or rise in respective of various decisions regarding operational ways in future.
  31. 31. 31 Chapter-3: Research Methodology 3.0 Introduction According to Bryman and Bell (2011), research methodology is one of the most important aspects of any research work. In the research related to the predictability of market returns using book to the market ratio researcher used appropriate strategy or methodology to complete research by analyzing several methods of research strategy. Brannen (2009) stated proper assessment of research methodology helps to solve problems related to the research work. The research paradigm or philosophy, data findings and investigations help to find out the result of the research problems (Onwuegbuzie and Leech, 2009). 3.1 Method Outline This particular research is based on secondary data. For this research, researcher has collected relevant data from reliable secondary sources like newspaper, journals, magazines, work of the past researchers. The most appropriate and authentic data is available on the website of the S&P 500 index. Secondary data is analyzed by using post positivism research philosophy, inductive approach and exploratory research design. The shares listed in this above mentioned index is also available in the website of stock exchanges. The usage of the most authenticated data or this research has led the way towards usage of secondary data in this particular research. 3.2 ResearchOnion For any research, research onion is the simplest strategy to understand research methodology that helped to conduct the research. The research steps are evaluated in such a way that one step could be understood by opening previous steps. Just like research onion has many layers, similarly in research work one step is revealed by opening another layer. There are many layers or methods related to research work. By opening the layers the researcher could understand appropriate method for each research. There are several layers of research onion like research philosophy, research approaches, research strategies, choices, time horizons and last one is data collection core. The diagram below shows the research onion in details about the methodology used in this research.
  32. 32. 32 Figure 3: Research Onion (Source: Saunders et al. 2009, pp.52) 3.3 ResearchParadigm/Philosophy The research philosophy is first layer or process to evaluate the research results or outcomes of research. The research philosophy comes with view point of researcher and with knowledge of the researcher. According to Brannen (2009), research philosophy also needs experience and technical knowledge of the researcher by working with the method. There are various types of research philosophies like positivism, realism; interpretivism (Vargas-Hernajndez, 2012).The epistemology approach of philosophy interacts with the relevant data in the field of education, while ontology deals with characters of reality and axiology deals with judgmental approaches of education. Bryman (2006) discussed that first philosophy related with the scientific approaches, second one related with the truth and third one is related with emotional attitude of the researcher. The positive philosophy of this research has been further divided and progressed towards post positivism factor.
  33. 33. 33 Figure 4: Research Philosophy (Source: Darner, 2008, pp.90) 3.3.1 Justification for selecting positivism The positivism research paradigm is related with emotional aspects related to scientific methods used for the research work. During study of positivism, a research topic is studied and researcher function is bounded in logical and analytical view approach. The details of data collected by researcher are proven and identifiable. The statistical study is done by researcher with the help of collected data. In the above mentioned topic positivism is taken as research paradigm. 3.4 ResearchApproach Harrison and Reilly (2011) mentioned that research subjects and objectives help to determine appropriate research approach that could be used for the research work. There are two types of distribution methods for research approach. They are Inductive method and Deductive method of research approaches. The deductive approach is related with testing theory, and it is most used research approach which conducted deduction of hypothesis, search hypothesis and modify theories as required in research. Inductive approach is related to generalization that is followed Research Philosophy POST POSITIVISM REALISM INTERPRETIVISM PRAGMATISM
  34. 34. 34 by theories developed for the research (Truscott et al. 2010) Deductive research approach is preferred for this research work as it has more particular working process. Figure 5: Research Approach (Source: Alaska, 2010, pp.34) 3.4.1 Justifying the use of Inductive approach This entire research is carried on the basis of the secondary data, and then the researcher has to carry out the entire research process with the data that has been used by some previous researchers or also from the respective websites or the reports that has been published by the authentic bodies and even from the company. The main motive for using the inductive approach is due to the no usability of the exact data as the matters published in all related journals, magazines, and websites are not up to date. And as these data is all about price of S&P 500 indexes, there is a change in the price of the shares change every day. Also due to the usage of the quantitative process of the research, inductive approach is necessary. Inductive approachfor research Deductive approach for research
  35. 35. 35 3.5 ResearchPurpose As described by the research onion there are three different types research design. They are Explanatory, Exploratory and Descriptive design. Explanatory design is related to theories that are believed in research. So it does able to reveal the reality of the topic of research. Descriptive research design evaluates the research work and gives the description about the research topic. The investigative research design helps to understand primary research and theoretical information related to the objectives (Walford, 2008). Figure 6: Research Design (Source: Darner, 2008, pp.78) 3.5.1. Justification for Analytical Design In this research work research study, issues and objectives are explained. So, analytical design is preferred for this research work. Various methods and objectives are collected from data analysis and explained with the help of analytical design. The data which are collected with the help of explanatory and exploratory are not find appropriate enough to able to provide required information about the research work. RESEARCH DESIGN EXPLANATORY EXPLORATORYANALYTICAL
  36. 36. 36 3.6 Researchstrategy As mentioned by Darner (2008) with the help of suitable research strategies a researcher can optimize the available research policies. Experiments, case studies, interviews, and surveys are the research strategies which provide the secondary information to the researcher about the event. 3.7 Methods of Data collection In introduction method of research data collection method is utilized to achieve the desired result. The data collected are used to analyze the components of the topic of research and support the research work. The data gathering methods with detail analysis is given below. 3.7.1 Secondary data collection According to Magilvy and Thomas (2009), secondary data collection methods include group of suitable data which is emerged with the help of journals, book, articles and literatures related with the research topic. Literature resources related to research is collected from various origins and organizations to get desired secondary data and make appropriate analysis to create results and conclusions. 3.7.2.2 Qualitative Data collection Qualitative data is related with the studies and analysis of attitude, thinking, knowledge and experience (Darner, 2008). In qualitative data collection method data are analyzed and recorded for the further use like findings and clear out conclusions. As the researcher has opted to carry out the secondary research, the data has been used from the reliable sources like the web published materials, journals, magazine articles. The researcher has to option to use the research findings of the other researchers. The data that has been used is not the present data, but the data has been reliable at some point of time. 3.8 Secondary Data Analysis As per the views of Bryman and Bell (2011), the secondary data that has been collected for the purpose of the research has been validated and rectification of the thematic data has been done. The data from the reliable sources that has been gathered for the purpose of the research has been
  37. 37. 37 presented through the tabular form and the necessary mathematical calculations have been done by using the data from the S&P 500 index. The data collected has also been tabulated and represented in the form of the graphs for the purpose of proving the authentication of the data used in the research. 3.9 Ethical considerations According to Bergh and Ketchen (2009), secondary data is the usage of the past data. The data is not recently collected for the purpose of the research but the entire data has been collected from the reliable and valid sources. The data that has been used has not been tampered or has been presented in arbitrary mode. Entire data of this research is real and the data has been presented in the best possible way according to the change of the market condition of the shares till the data of the using the valid data. The authentic form of the data has been represented in both graphical and tabular form. The calculations that have been shown are also based on the true data and the calculations are also done in proper method. 3.10 Time schedule considered to perform research (Gantt chart) The researcher follows the appropriate time schedule to conduct the research work in limited time period by following the Gantt chart of research methodology. The below provided schedule was followed by the researcher to conduct the research in appropriate manner. Key activities 1st-2nd week 3rd week to 9th week 10th week to 15th 16th week to 20th week 21st week to 23rd week 24th week Selection of the topic  Composition of the literature review  Research methodology 
  38. 38. 38 Collection of secondary data  Analysis and interpretation of secondary data  Findings  Conclusion and Recommendation  Final submission  Table 1: Gantt chart (Source: As created by Author) 3.11 Summary In this chapter of research methodology, the researcher tries to make effort to create the most appropriate and effective methodology to complete research work. The reliable research methodology is adopted by studying the research onion. The methodology involves the positivism philosophy, deductive approach, and analytical design to conduct the current research. As the entire research is dependent on the case of the secondary data, the most reliable and the valid data has been used by the researcher. The data represents the changes of the market condition as the price of the shares are due to change on everyday basis and the change is different for the different types of the industries that have been listed in the index.
  39. 39. 39 Chapter 4: Data analysis and Findings 4.1 Introduction This particular research is based on the secondary data only. The process of collecting the secondary data is rather easy as compared to the collection of the primary data. Researcher needs to collect the required data from the works of the past researchers. Other reliable sources of the data collection are the books, journals, magazines, and the most reliable of all is the website that can be accessed from the internet and from the own site of the company and also from the site of the index publishers. The published articles of the different credit rating agencies are also the reliable sources of gathering the secondary data. In general the reliability and the acceptability of the secondary data changes from one case to other but the results received due to the presentation of the secondary data is going to be changed and different than the result that will be obtained from the primary data. 4.2 Critical evaluation of the issues related to the market returns of the S&P 500 indexes under S & P 500 indexes Share Market condition The condition of the share market for the last 10 years is not that much influencing or progressive. The price of the shares have shown rise in some parts but have also shown sharp falls during the major part of the time span. The market has been very much vulnerable and the predictions regarding the growth have proven wrong for moist of the time. The present period has experienced the growth of the share prices but has lasted for a short period. As per the views of Alaska (2010), the vulnerable condition of the entire market is due to some avoidable and unavoidable conditions that are present in the economical cycle of the entire economy and in all the countries of the same continent. The factors are the recession in the world economy, rise in the prices of the relevant products and the decline of the value of the currencies of the most developed countries and the decrease in the purchasing power of the S&P 500 index. (For graph refer to appendix 1) The last 10 years condition of the share market belonging to the S&P 500 index are also the same as compared to the other indexes like Bloomberg terminal and others. In this particular period,
  40. 40. 40 the performances of the industries have changed a lot. Some of the industries have made high range of profit while some of the industries are in the successive years of loss making. If a close look is made in the performance of the hedge funds, the decimation is clearly seen. Cenesizoglu (2011) opined that the performance of the hedge funds have tended to underperform in the entire market scenario as the involved risks have increased a lot in the last decade. In addition, until the present date the expected rate of the return has not reached the expected level or the calculated result that has been made by the market experts. Due to the factor of taking short-term strategies by the S&P 500 index regarding the investment structure of the company the rate of the investment return has been decreasing a lot in the present time. Since the year 1995, the annual returns from the second quarter of the year has remained nearly around 8-8.6%, and has experienced the growth till 9% at the maximum level. At the later part of the decade, the S&P 500 index started to perform better than the hedge funds and the rate of the annual returns have increased to the limit of double of the hedge funds. The result has been derived as the correlation co efficient between the two indices has depicted the result of 0.6 and the beta factor has not risen up than the level of 033 since the last decade (Kang et al. 2010) (For Graph refer to appendix 2) After the massive crash in the share market of the entire world, the market has remained unable to recover from the position of making losses. The result can be proved, as the growth rate of the shares has remained the same since the last 10 years regarding the annual return from the investments. The presence of huge amount of credit in the market has declined the position of the stock market, as the time needed for recovering the money has been difficult due to the lack of the liquid money in the hands of the people. According to Darner (2008), People has also adopted the tendency to invest in the less risky shares as the risky shares have the tendency to bring more profit but is vulnerable to massive fall in the present market conditions. Among the entire listed S&P 500 index in the S&P 500 index, the most profitable industries are the telecommunication, industries, health, and social care, consumer goods, information technology. While the loss making S&P 500 index listed in the sectors are the industries like the beauty products, and the products like garments and many more small level industries. Profit making Industries The profit making industries belonging to the S&P 500 for the last 10 years are the goods
  41. 41. 41 industry, energy S&P 500 index, consumer goods industries, the industry relating to the means of media communication, financial institutions and the insurance sector, software industry, the health care and telecommunications. Cameron (2009) opined that in relation to these industries, the most profitable industries have enjoyed the growth. If the performance of these industries is taken for the period of the last 80 year or so, then it can be said that the S&P 500 index belonging to these industries have enjoyed a medium level to high level of growth in the index price of the shares. For finding out the profitability of the industries, the recent data on the profitability of the industries for the last 6 months to 1 year has been analyzed. In addition, the results show that the industries have enjoyed quite high range of profitability and have all the positive predictions regarding the growth in the next one-year or so. Industries Last 1 year growth Last 6 months growth Present rate of growth Financial company(Banks, insurance and others) 6.8 7.6 7.7 Materials (Commercial and consumer goods) 8.1 8.2 8.5 Health care (services) 4.6 4.7 4.7 I.T. (hardware and software) 19.9 19.4 20.0 Telecommunication 10.4 10.4 10.4 Food industry 2.8 2.8 2.8 Energy (Oil and gas) 11.7 12.5 12.7 Media houses 9.7 9.8 10.2 Table 2: Table showing the growth of the profitable industries of S&P 500 Index (Source: Business Insider, 2015
  42. 42. 42 Statistics last 1 year growth rate Last 6 months growth Present rate of growth N Valid 8 8 8 Missing 0 0 0 Mean 9.2500 9.4250 9.6250 Std. Error of Mean 1.84923 1.79829 1.86047 Median 8.9000 9.0000 9.3500 Mode 2.80a 2.80a 2.80a Std. Deviation 5.23041 5.08633 5.26220 Variance 27.357 25.871 27.691 Skewness 1.117 .895 .916 Std. Error of Skewness .752 .752 .752 Kurtosis 2.035 1.467 1.561 Std. Error of Kurtosis 1.481 1.481 1.481 Range 17.10 16.60 17.20 Minimum 2.80 2.80 2.80 Maximum 19.90 19.40 20.00 Percentiles 25 5.1500 5.4250 5.4500 50 8.9000 9.0000 9.3500 75 11.3750 11.9750 12.1250 a. Multiple modes exist. The smallest value is shown Statistics last 1 year growth rate Last 6 months growth Present rate of growth N Valid 8 8 8 Missing 0 0 0 Mean 9.2500 9.4250 9.6250 Std. Error of Mean 1.84923 1.79829 1.86047 Median 8.9000 9.0000 9.3500 Mode 2.80a 2.80a 2.80a Std. Deviation 5.23041 5.08633 5.26220 Variance 27.357 25.871 27.691 Skewness 1.117 .895 .916
  43. 43. 43 Std. Error of Skewness .752 .752 .752 Kurtosis 2.035 1.467 1.561 Std. Error of Kurtosis 1.481 1.481 1.481 Range 17.10 16.60 17.20 Minimum 2.80 2.80 2.80 Maximum 19.90 19.40 20.00 Percentiles 25 5.1500 5.4250 5.4500 50 8.9000 9.0000 9.3500 75 11.3750 11.9750 12.1250 a. Multiple modes exist. The smallest value is shown last 1 year growth rate Frequenc y Percent Valid Percent Cumulative Percent Valid 2.80 1 12.5 12.5 12.5 4.60 1 12.5 12.5 25.0 6.80 1 12.5 12.5 37.5 8.10 1 12.5 12.5 50.0 9.70 1 12.5 12.5 62.5 10.40 1 12.5 12.5 75.0 11.70 1 12.5 12.5 87.5 19.90 1 12.5 12.5 100.0 Total 8 100.0 100.0 Table 3: Table showing the statistical data of the profitable industries listed in S&P 500 (Source: As created by author)
  44. 44. 44
  45. 45. 45 Figure 7: Graph showing the growth rate of the profitable industries for the last 1 year to present (Source: Created by author) Analysis After conducting the entire study of the profitable industries of the above-mentioned S&P 500 6.8 8.1 4.6 19.9 10.4 2.8 11.7 9.7 7.6 8.2 4.7 19.4 10.4 2.8 12.5 9.8 7.7 8.5 4.7 20 10.4 2.8 12.7 10.2 Growth of the industries
  46. 46. 46 index, it can be easily depicted that the period of the last 1 year until the present times have enjoyed the maximum level of the growth. However, the margin is not very high but it is still in a strong position related to the other industries of the index (Jiang, 2009). Among the profitable industries, the most profitable part of the industry belongs to the I.T. section that has enjoyed the growth. In addition, at present is settled at the level of 20.0%. The next performance of growth has been depicted for the Energy industry where the oil and gas S&P 500 index have been able to enjoy a successful growth rate of more than 12 and counts for 12.7 at the present. As expected, the next best performer is the sector of telecommunication presently standing at the rate of 10.4 since the last 1-year or so. However, in the context of the growth rate of the other industries, the sector of health care and the food industry are still unable to enjoy the growth rate of 5. Counting the growth of the food industry of 2.8% and 4.7% of health care and it can be said that these two industries can be categorized as the less performing or the industries that are vulnerable to make losses in the upcoming years. Industries facing major loss Likewise, some of the industries listed in the S&P 500 index are still underperforming and in the present the S&P 500 index of the specific industries are on the verge of incurring losses. The respective loss making sectors of the S&P 500 indexed S&P 500 index. From the website it can be seen that the sectors of food, health care and the sector of the mutual funds are the most important and the seriously loss making industries. The sectors of beauty products and garments are also easily included in the list of the loss making industries in USA. If a close observation is made in the above-mentioned loss making industries, it can be said that the S&P 500 index having a pure and proper brand value. Moreover, a huge base of the customers is on the higher side of the business where as the minor or the entry level industries of these sectors are the major sufferers. Due to the purpose of making an entry in the market and creating a reputation in the market and enter in the competition, these S&P 500 index or the brands try to make different types of strategies in order to attract the views of the customers. In case of investing in the hedge bonds in the mutual fund sector, the investors have received the return of about 0.4% in the previous financial year. Industries Last 1 year growth Last 6 months growth Present rate of growth
  47. 47. 47 Food industry 2.8 2.8 2.8 Clothing 2.4 2.4 2.2 Beauty products 1.89 2.0 2.2 Mutual funds 0.5 0.4 0.4 USA retail market 1.3 2.85 2.5 Table 4: Table showing the decline of the loss making industries of S&P 500 Index (Source: Business Insider, 2015) Statistics Last 1 year growth Last 6 months growth Present rate of growth N Valid 5 5 5 Missing 0 0 0 Mean 1.7780 2.0900 2.0200 Std. Error of Mean .40655 .44956 .42000 Median 1.8900a 2.4000a 2.3000a Mode .50b .40b 2.20 Std. Deviation .90908 1.00524 .93915 Variance .826 1.011 .882 Skewness -.492 -1.641 -1.838 Std. Error of Skewness .913 .913 .913 Kurtosis -.751 2.717 3.751 Std. Error of Kurtosis 2.000 2.000 2.000 Range 2.30 2.45 2.40 Minimum .50 .40 .40 Maximum 2.80 2.85 2.80 Sum 8.89 10.45 10.10 Percentiles 10 .5000c .4000c .4000c 20 .9000 1.2000 1.0000 25 1.1000 1.6000 1.3000 30 1.3000 2.0000 1.6000 40 1.5950 2.2000 2.2000 50 1.8900 2.4000 2.3000
  48. 48. 48 60 2.1450 2.6000 2.4000 70 2.4000 2.8000 2.5000 75 2.5000 2.8125 2.5750 80 2.6000 2.8250 2.6500 90 2.8000 2.8500 2.8000 a. Calculated from grouped data. b. Multiple modes exist. The smallest value is shown c. Percentiles are calculated from grouped data. Last 1 year growth Frequenc y Percent Valid Percent Cumulative Percent Valid .50 1 20.0 20.0 20.0 1.30 1 20.0 20.0 40.0 1.89 1 20.0 20.0 60.0 2.40 1 20.0 20.0 80.0 2.80 1 20.0 20.0 100.0 Total 5 100.0 100.0 Last 6 months growth Frequenc y Percent Valid Percent Cumulative Percent Valid .40 1 20.0 20.0 20.0 2.00 1 20.0 20.0 40.0 2.40 1 20.0 20.0 60.0 2.80 1 20.0 20.0 80.0 2.85 1 20.0 20.0 100.0 Total 5 100.0 100.0 Present rate of growth Frequenc y Percent Valid Percent Cumulative Percent
  49. 49. 49 Valid .40 1 20.0 20.0 20.0 2.20 2 40.0 40.0 60.0 2.50 1 20.0 20.0 80.0 2.80 1 20.0 20.0 100.0 Total 5 100.0 100.0 Table 5: Table showing the statistical data of the loss making industries listed in S&P 500 (Source: As created by author)
  50. 50. 50
  51. 51. 51 Figure 8: Graph showing the growth rate of the profitable industries for the last 1 year to present (Source: Created by author) Despite of reviewing the reports published about the low performance of the loss making industries belonging in the S&P 500 index, still other industries are less in performance due to the certain existing factors in the industry. The factors are described as follows:  Presence of the Reputed S&P 500 index having positive brand image  Existence of the minor S&P 500 index  All the S&P 500 index are not included in the stock indices  Downswing of the entire economy  Recession all over the world, especially in the developed industries According to Penman et al. (2009) though these factors are present there are still some S&P 500 index belonging to the particular loss making industry that has been able to make huge profits in these particular years. The S&P 500 index like Delta Airlines, Pepco Holding co, etc all have been able to make huge profits in the context of the loss-making period of the entire period. When these S&P 500 index are making huge profits, the other S&P 500 index belonging to the particular industry are found suffering in the position of break even, loss or have to stick to the strategy of making charity pricing. In many cases, some of the companies listed in the S&P 500 Loss making industries Fooding industry Clothing Beauty products Mutual funds UK retail market
  52. 52. 52 index had to withdraw from the business sector in order to save the capital of the company and then wait for the favorable conditions to arrive so that the business can be made profitable. Actually, the scenario has been adverse for the people even in making the investment in the mutual funds. The declining pattern of the business of the mutual fund industry is due to the preference of the less risky shares as the investors are not keen to make any loss of the liquid money in the share market. The investors are generally interested to save the capital money and even lately the number of investor have declined up to a certain limit and that is one of the main reasons behind the overall decline of the mutual fund sector (Lam, 2009). The case scenario is quite same in respect of the companies belonging to the food and the clothing industry. Generally, it has been seen that the listed companies, the reputation of the brands are catchier to the users and the majority of the users stick to the particular type of the brand or the product. The quality of the food and the dress material is the main concern for the users, as the people are less interested to make les expenses regarding the purchase of the garments, and not interested to eat outside too often, so the sales figures of these less known brands are mostly hampered. Though the price of the branded products is higher than the less known products, still people have developed the habit of preferring the quality of the product to the price of the product. Jiang and Lee (2007) opined there is also a concern regarding the sector of health and social care. Though this particular sector is not a profit making industry but still it has been seen that the concern of people regarding the health of the people is still very less and that is the reason for suffering of this particular sector. Though the different health care agencies are trying to improve the condition of this particular sector, still the rate has been in the declining version. Industries Present rate of growth Present rate of decline Financial company(Banks, insurance and others) 7.7 N/A Materials 8.5 N/A
  53. 53. 53 (Commercial and consumer goods) Health care (services) 4.7 N/A I.T. (hardware and software) 20.0 N/A Telecommunication 10.4 N/A Food industry 2.8 N/A Energy (Oil and gas) 12.7 N/A Media houses 10.2 N/A Food industry (Restaurants) N/A 2.8 Clothing N/A 2.2 Beauty products N/A 2.2 Mutual funds N/A 0.4 USA retail market N/A 2.5 Table 6: Table showing the decline of the loss making industries of S&P 500 Index (Source: Business Insider, 2015) Statistics Present rate of growth Present rate of decline N Valid 13 13 Missing 0 0 Mean 5.9231 .78 Std. Error of Mean 1.75207 .321 Median 4.7000 .00 Mode .00 0 Std. Deviation 6.31719 1.158 Variance 39.907 1.340 Skewness .867 .975
  54. 54. 54 Std. Error of Skewness .616 .616 Kurtosis .265 -1.110 Std. Error of Kurtosis 1.191 1.191 Range 20.00 3 Minimum .00 0 Maximum 20.00 3 Sum 77.00 10 Percentiles 10 .0000 .00 20 .0000 .00 25 .0000 .00 30 .0000 .00 40 1.6800 .00 50 4.7000 .00 60 8.0200 .16 70 9.8600 1.84 75 10.3000 2.20 80 10.8600 2.26 90 17.0800 2.68 Present rate of growth Frequenc y Percent Valid Percent Cumulative Percent Valid .00 5 38.5 38.5 38.5 2.80 1 7.7 7.7 46.2 4.70 1 7.7 7.7 53.8 7.70 1 7.7 7.7 61.5 8.50 1 7.7 7.7 69.2 10.20 1 7.7 7.7 76.9 10.40 1 7.7 7.7 84.6 12.70 1 7.7 7.7 92.3 20.00 1 7.7 7.7 100.0 Total 13 100.0 100.0 Present rate of decline
  55. 55. 55 Frequenc y Percent Valid Percent Cumulative Percent Valid 0 8 61.5 61.5 61.5 0 1 7.7 7.7 69.2 2 2 15.4 15.4 84.6 3 1 7.7 7.7 92.3 3 1 7.7 7.7 100.0 Total 13 100.0 100.0 Table 7: Table showing the statistical data of the loss making industries listed in S&P 500 (Source: As created by author)
  56. 56. 56 0 7.7 8.5 4.7 20 10.4 2.8 12.7 10.2 0 0 0 0 00 0 0 0 0 0 0 0 0 2.8 2.2 2.2 0.4 2.52 2 3 5 0 0 0 0 0 0 0 0 0 0 Trend line showing growth and decline
  57. 57. 57 Figure 9: Graph showing the trend of growth and decline of the related industries (Source: Created by author) The trend lines show the volatility of the industry as per the growth and the fall of the S&P 500 index belonging to the same industry. But, still the fact is that the non performing S&P 500 index are unable to make the business as per the demand of the industry, but still the leaders of the respective industry are the major performers still in the present situation and would continue to do so in the future years (Basu, 2008). S&P 500 index Situation in context to financial status of the USA market According to the financial status of the market, the S&P 500 index are not able to perform as per the required goal of the company. The main motive of the listed companies is to keep the business alive and then attract the new customers. Here, companies having a positive brand image among the following customers are able to retain the old customers as well as bring new customers. Now the companies are not making any decision regarding the expansion of the business especially in the European countries. Nevertheless, there are still some places in USA, where demands of products manufactured and sold by this loss making industry have quite higher demand. As per the views of Lam (2009), even the high profile companies in the sector of the garments and the food chains are still unable to make the business expenses or take any decision regarding the expansion. The major sufferers are the small and the less reputed business units. The industry related to the making investments in the mutual fund market is in the worst condition ever. The returns are so much unpredictable and due to successive loss making of the particular sector, the rate of making investments has gone down by far limits. Now, if a close look is made in the profitable sectors of the market, the sectors that has been able to make profits successively for the last one year has kept the rate of the growth constant and even higher than the market predictions. Actually, the reason behind the growth of these particular sectors has a proper economical reason. The demand of the products of these sectors have grown excessively and that has lead to the reduction of the price of the products, the actual reason behind the consumption of these products and helping the industry directly in the favourable manner towards growth. According to Piotroski (2007), in perspective to the rise and fall in the market conditions that has been observed since the last decade is also due to the political turmoil in the some of the countries. The excessive rise in the price of gold and the
  58. 58. 58 political effect in the major petroleum producing countries have led towards the situation of the declining market condition. Therefore, it can be concluded that some of the industries have been able to make high profit whereas the others are in the course of making losses or even towards the position of shut down Analysis of the return of S&P 500 index for the period of 1926 to 2013 For this research, analysing the returns from the shares of the companies listed in the S&P 500 index has been made. The data used for this particular analysis is taken from S&P 500 index website. The return rate for the year is calculated in the basis of annual, monthly and quarterly basis. It is easily seen that prices of this index have experienced major fall. In most of the years, especially when market recession was persisting in this economy, the market rate fell at a massive rate. To make detail analysis of the return rates, the data is divided into 2 parts. The analysis is done in details for annual, monthly and quarterly basis. For making a better study, the index data is divided into 3 parts. This segregation helped the researcher to make a detail analysis of the history of S&P 500 index starting from 1926 until 2013. Date (Year) Index Book to market Dividend Yield 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 13.49 17.66 24.35 21.45 15.34 8.12 6.89 10.10 9.50 13.43 17.18 10.55 13.21 0.4414758270 0.3746885899 0.2596666667 0.3384578236 0.5547454126 1.1707317073 1.4420843014 0.8290260464 0.7737408689 0.5599111913 0.4585881045 0.7074886223 0.5720393884 0.051148999 0.043601359 0.034907598 0.045221445 0.063885267 0.100985222 0.07256894 0.043564356 0.047368421 0.034996277 0.041909197 0.075829384 0.038607116
  59. 59. 59 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 12.49 10.58 8.69 9.77 11.67 13.28 17.36 15.30 15.30 15.20 16.76 20.41 23.77 26.57 24.81 35.98 45.48 46.67 39.99 55.21 59.89 58.11 71.55 63.10 75.02 84.75 92.43 80.33 96.47 0.5807053804 0.7290475101 0.8895097332 0.8626465662 0.7874015748 0.7437635753 0.6132393344 0.6924379233 0.7253256790 0.8409475465 0.7964292839 0.7225384419 0.7213163466 0.6940733128 0.7597009612 0.6041197854 0.5098280098 0.5441768274 0.6536757786 0.5117793198 0.4577837965 0.5504229651 0.5059222584 0.5916270511 0.5255914542 0.4872273003 0.4306378062 0.5769451056 0.5257924451 0.049639712 0.063327032 0.081703107 0.060388946 0.05227078 0.048192771 0.038018433 0.046405229 0.054901961 0.061184211 0.068019093 0.072023518 0.059318469 0.053067369 0.058444176 0.042801556 0.036059807 0.037283051 0.04476119 0.031697156 0.030556019 0.033557047 0.028232006 0.033755943 0.030391895 0.029498525 0.029427675 0.035727624 0.030268477
  60. 60. 60 Table 8: Table showing index, book to market and dividend yield of S&P 500 indexes (1926-1966) (Source: S&P 500) Statistics Present rate of growth Present rate of decline N Valid 13 13 Missing 0 0 Mean 5.9231 .78 Std. Error of Mean 1.75207 .321 Median 4.7000 .00 Mode .00 0 Std. Deviation 6.31719 1.158 Variance 39.907 1.340 Skewness .867 .975 Std. Error of Skewness .616 .616 Kurtosis .265 -1.110 Std. Error of Kurtosis 1.191 1.191 Range 20.00 3 Minimum .00 0 Maximum 20.00 3 Sum 77.00 10 Percentiles 10 .0000 .00 20 .0000 .00 25 .0000 .00 30 .0000 .00 40 1.6800 .00 50 4.7000 .00 60 8.0200 .16 70 9.8600 1.84 75 10.3000 2.20 80 10.8600 2.26 90 17.0800 2.68
  61. 61. 61 Present rate of growth Frequenc y Percent Valid Percent Cumulative Percent Valid .00 5 38.5 38.5 38.5 2.80 1 7.7 7.7 46.2 4.70 1 7.7 7.7 53.8 7.70 1 7.7 7.7 61.5 8.50 1 7.7 7.7 69.2 10.20 1 7.7 7.7 76.9 10.40 1 7.7 7.7 84.6 12.70 1 7.7 7.7 92.3 20.00 1 7.7 7.7 100.0 Total 13 100.0 100.0 Present rate of decline Frequenc y Percent Valid Percent Cumulative Percent Valid 0 8 61.5 61.5 61.5 0 1 7.7 7.7 69.2 2 2 15.4 15.4 84.6 3 1 7.7 7.7 92.3 3 1 7.7 7.7 100.0 Total 13 100.0 100.0 Table 9: Table showing index, book to market and dividend yield of S&P 500 indexes (1926-1966) (Source: S&P 500)
  62. 62. 62
  63. 63. 63 Statistics S&P500 Index Book to market Dividend Yield N Valid 42 42 42 Missing 0 0 0 Mean 31.6240476 .6456490 .0484647 Std. Error of Mean 4.07166426 .03271802 .00254928 Median 17.5100000 .5978734 .0449913 Mode 15.30000 .25967a .02823a Std. Deviation 26.38740027 .21203701 .01652119 Variance 696.295 .045 .000 Skewness 1.168 1.461 1.056 Std. Error of Skewness .365 .365 .365 Kurtosis .076 4.222 1.103 Std. Error of Kurtosis .717 .717 .717 Range 89.58000 1.18242 .07275 Minimum 6.89000 .25967 .02823 Maximum 96.47000 1.44208 .10099 Sum 1328.21000 27.11726 2.03552 Percentiles 10 9.5810000 .4338892 .0303055 20 11.2340000 .4984443 .0336764 25 13.0300000 .5112915 .0349741 30 13.4150000 .5257723 .0360266 40 15.3080000 .5623368 .0420877 50 17.5100000 .5978734 .0449913 60 24.2340000 .6937462 .0493503 70 40.5390000 .7256979 .0552562 75 48.8050000 .7477479 .0595861 80 58.8220000 .7792052 .0620413 90 78.7370000 .8561369 .0724053 a. Multiple modes exist. The smallest value is shown S&P500 Index Frequenc y Percent Valid Percent Cumulative Percent Valid 6.89000 1 2.4 2.4 2.4
  64. 64. 64 8.12000 1 2.4 2.4 4.8 8.69000 1 2.4 2.4 7.1 9.50000 1 2.4 2.4 9.5 9.77000 1 2.4 2.4 11.9 10.10000 1 2.4 2.4 14.3 10.55000 1 2.4 2.4 16.7 10.58000 1 2.4 2.4 19.0 11.67000 1 2.4 2.4 21.4 12.49000 1 2.4 2.4 23.8 13.21000 1 2.4 2.4 26.2 13.28000 1 2.4 2.4 28.6 13.43000 1 2.4 2.4 31.0 13.49000 1 2.4 2.4 33.3 15.20000 1 2.4 2.4 35.7 15.30000 2 4.8 4.8 40.5 15.34000 1 2.4 2.4 42.9 16.76000 1 2.4 2.4 45.2 17.18000 1 2.4 2.4 47.6 17.36000 1 2.4 2.4 50.0 17.66000 1 2.4 2.4 52.4 20.41000 1 2.4 2.4 54.8 21.45000 1 2.4 2.4 57.1 23.77000 1 2.4 2.4 59.5 24.35000 1 2.4 2.4 61.9 24.81000 1 2.4 2.4 64.3 26.57000 1 2.4 2.4 66.7 35.98000 1 2.4 2.4 69.0 39.99000 1 2.4 2.4 71.4 45.48000 1 2.4 2.4 73.8 46.67000 1 2.4 2.4 76.2 55.21000 1 2.4 2.4 78.6 58.11000 1 2.4 2.4 81.0 59.89000 1 2.4 2.4 83.3 63.10000 1 2.4 2.4 85.7 71.55000 1 2.4 2.4 88.1
  65. 65. 65 75.02000 1 2.4 2.4 90.5 80.33000 1 2.4 2.4 92.9 84.75000 1 2.4 2.4 95.2 92.43000 1 2.4 2.4 97.6 96.47000 1 2.4 2.4 100.0 Total 42 100.0 100.0 Book to market Frequenc y Percent Valid Percent Cumulative Percent Valid .25967 1 2.4 2.4 2.4 .33846 1 2.4 2.4 4.8 .37469 1 2.4 2.4 7.1 .43064 1 2.4 2.4 9.5 .44148 1 2.4 2.4 11.9 .45778 1 2.4 2.4 14.3 .45859 1 2.4 2.4 16.7 .48723 1 2.4 2.4 19.0 .50592 1 2.4 2.4 21.4 .50983 1 2.4 2.4 23.8 .51178 1 2.4 2.4 26.2 .52559 1 2.4 2.4 28.6 .52579 1 2.4 2.4 31.0 .54418 1 2.4 2.4 33.3 .55042 1 2.4 2.4 35.7 .55475 1 2.4 2.4 38.1 .55991 1 2.4 2.4 40.5 .57204 1 2.4 2.4 42.9 .57695 1 2.4 2.4 45.2 .58071 1 2.4 2.4 47.6 .59163 1 2.4 2.4 50.0 .60412 1 2.4 2.4 52.4 .61324 1 2.4 2.4 54.8 .65368 1 2.4 2.4 57.1 .69244 1 2.4 2.4 59.5

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