Asset Pricing Simultaneity, Three-Factor Model and Cost Analysis (Table) (Report‪)‬

Abstract (1) The aim is to explain the phenomenon of the atheoretic size and value effects in asset pricing, which lack face validity, and to thereby resolve contradictory assertions about the theoretical and empirical validity of asset-pricing models of return with price-entailing risk factors. It is shown that size, value and other price-entailing factors are not scientifically valid in an asset-pricing model of return estimated and tested by scientific statistical methods. Analysis shows that the direct cost of these pricing fallacies is hundreds of millions dollars each year in capital markets worldwide.