Three analyses of the firm size premium

Joel L. Horowitz*, Tim Loughran, N. E. Savin

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

65 Scopus citations

Abstract

The size premium for smaller companies is one of the best-known academic market anomalies. The relevant issue for investors is whether size premium for small-cap stocks is still positive, and, if so, whether its magnitude is substantial. In our analysis, we use annual compounded returns, monthly cross-sectional regressions, and linear spline regressions to investigate the relation between expected returns and firm size during 1980-1996. All three methodologies report no consistent relationship between size and realized returns. Hence, our results show that the widespread use of size in asset pricing is unwarranted.

Original languageEnglish (US)
Pages (from-to)143-153
Number of pages11
JournalJournal of Empirical Finance
Volume7
Issue number2
DOIs
StatePublished - Aug 2000

Keywords

  • Asset pricing
  • G12
  • G14
  • Size premia
  • Spline regressions

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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