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the process can be automated, thus eliminating the need for biased assumptions and also making it a very cost efficient method.
The book-to-market effect is another anomaly that has been found to yield positive excess returns (Rosenberg, Reid, and Lanstein 1985). The higher the ratio, the lower the market values a company’s assets, which in turn can point to the company itself being undervalued. The explanation for the apparent excess return earned varies, and some claim that the excess return is to a large extent a reward for the extra inherit risk in low book to market firms (Fama and French 1992). On the other hand Lakonishok, Shleifer and Vishny (1994) find that the strategy exploits weaknesses in investor behavior and find no added risk that should be rewarded.

5. Bibliography

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