"Cross-sectional Variation of Stock Returns: A Cristal Survey"(in Japanese)

We explore the massive literature on the cross-sectional difference of stock returns, as developed in the quarter-century history of financial economics. Emphasis is on recent dispute triggered by Fama and French, who claimed that firm size (measured by market capitalization) and book-to-market equity combine to capture sufficiently the cross-sectional variation in average stock returns."," The paper consists of four chapters. The first two chapters contrast opposing empirical results whether the phenomenon is consistent with the single-beta capital asset pricing model. We illustrate that empirical researches on this topic use either one of two major test methods, the cross-sectional test initiated by Fama and MacBeth and the time-series test proposed by Black, Jensen and Scholes. We show that the empirical outcome is very sensitive to the particular econometric method used, and assert that Gibbons-Ross-Shanken's multivariate test, which is an extension of the Black-Jensen-Scholes test, seems the best test methodology available."," The latter two chapters investigate how two schools of thoughts in modern finance theory gave interpretations of the phenomenon. One school is resided by orthodox (neoclassical) financial economists whose paradigm is Merton's intertemporal version of the capital asset pricing model (the multi-beta capital asset pricing model). "Adventurous"economists who emphasize the role of market irrationalities comprise the second school. We show that both have strength in explaining some feature of the reality but both have their shortcomings, too. The final part of the paper is devoted to the survey of articles which attempt to capture the phenomenon in the framework of consumption capital asset pricing model and the capital asset pricing model with time-varying parameters.