The book-to-market phenomenon refers to an empirical regularity that book-to-market ratio is positively associated with subsequent stock return. The phenomenon cont1icts with market etT1ciency and can not be explained by pricing models like the Capita1 Asset Pricing Model. This paper investigates whether the book-to-market phenomenon is present in Taiwan. Empirical results show that book-to-market ratio is a stable leading indicator of subsequent returns, thereby confining the existence of the phenomenon. However, the “contrarian view” of Lakonishok, Shleifer, and Vishny ( 1994) only partially accounts for the book-to-market phenomenon in Taiwan.