ABSTRACT
Deviations from the EMH, named as anomalies such as the small fi rm eff ect and calendar eff ects, cannot be explained by the EMH and the expected return theory. Studies which present evidence that portfolio strategies formed based on these anomalies provide high returns can be found widely in the existing fi nance literature. One of these strategies is to short a portfolio made up of big and low book-to-market stocks and long a portfolio made up of small and high book-to-market stocks. Basu (1977) and Reinganum (1981) pioneered in the development of this strategy.
