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We present evidence of the cross‐sectional relation between security returns, beta, firm size and book‐to‐market ratio over the period 1971 to 1993 on the New Zealand sharemarket. Our results suggest that the NZSE‐40 market index is not a mean‐variance efficient market proxy—the betas calculated with respect to it being of little use for explaining expected returns cross‐sectionally. Also, there is a significant positive relation between book‐to‐market ratio and average return.
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Bryant et al. (1997) studied this question.
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