The Journal of finance re-rankint estimates, discussed below ). And the firm must have comPUSTat data on total book assets(A), book equity(Be), and ear ings(E), for its fiscal year ending in(any month of) calendar year t-1 Our use of December market equity in the E/P, BE/ME, and leverage ratios is objectionable for firms that do not have December fiscal yearends because the accounting variable in the numerator of a ratio is not aligned ith the market value in the denominator Using mE at fiscal yearends is lso problematic; then part of the cross sectional variation of a ratio for a given year is due to market-wide variation in the ratio during the year. For xample, if there is a general fall in stock prices during the year, ratios measured early in the year will tend to be lower than ratios measured later We can report, however, that the use of fiscal-yearend MEs, rather than December MEs, in the accounting ratios has little impact on our return tests Finally, the tests mix firms with different fiscal yearends. Since we match accounting data for all fiscal yearends in calendar year t-1 with returns for ly of t to June of t+ 1, the gap between the accounting data and the matching returns varies across firms. We have done the tests using the maller sample of firms with December fiscal yearends with similar results B. Estimating Market Bs Our asset-pricing tests use the cross-sectional regression approach of Fama and MacBeth(1973). Each month the cross-section of returns on stocks is egressed on variables hypothesized to explain expected returns. The time- series means of the monthly regression slopes then provide standard tests of whether different explanatory variables are on average price Since size, E/P, leverage, and BE/ME are measured precisely for individ ual stocks, there is no reason to smear the information in these variables by using portfolios in the Fama-MacBeth(FM) regressions. Most previous tests use portfolios because estimates of market @s are more precise for portfolios Our approach is to estimate Bs for portfolios and then assign a portfolio's p to each stock in the portfolio. This allows us to use individual stocks in the Fm asset-pricing tests B. 1. a Estimation: Details In June of each year, all NYSE stocks on CRSP are sorted by size(ME) to determine the NYSe decile breakpoints for ME. NYSE, AMEX, and NASDAQ stocks that have the required CRSP-comPUSTAT data are then allocated to 10 size portfolios based on the NYSE breakpoints. (If we used stocks from all three exchanges to determine the Me breakpoints, most portfolios would include only small stocks after 1973, when NASDAQ stocks are added to the sample. We form portfolios on size because of the evidence of Chan and Chen(1988) nd others that size produces a wide spread of average returns and As Chan and Chen use only size portfolios. The problem this creates is that size and the Bs of size portfolios are highly correlated (-0.988 in their data),so