Abstract

http://ssrn.com/abstract=2553889
 


 



Size Matters, If You Control Your Junk


Clifford S. Asness


AQR Capital Management, LLC

Andrea Frazzini


AQR Capital Management, LLC

Ronen Israel


AQR Capital Management, LLC

Tobias J. Moskowitz


AQR Capital; University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Lasse Heje Pedersen


AQR Capital Management, LLC; Copenhagen Business School - Department of Finance; New York University (NYU); Centre for Economic Policy Research (CEPR)

January 22, 2015

Fama-Miller Working Paper

Abstract:     
The size premium has been challenged along many fronts: it has a weak historical record, varies significantly over time, in particular weakening after its discovery in the early 1980s, is concentrated among microcap stocks, predominantly resides in January, is not present for measures of size that do not rely on market prices, is weak internationally, and is subsumed by proxies for illiquidity. We find, however, that these challenges are dismantled when controlling for the quality, or the inverse “junk”, of a firm. A significant size premium emerges, which is stable through time, robust to the specification, more consistent across seasons and markets, not concentrated in microcaps, robust to non-price based measures of size, and not captured by an illiquidity premium. Controlling for quality/junk also explains interactions between size and other return characteristics such as value and momentum.

Number of Pages in PDF File: 59

Keywords: Size, Size effect, Size Anomaly, Small Cap, Microcap, Quality, Junk, Profitability, Market efficiency, January Effect, Illiquidity, Value, Momentum, Low volatility

JEL Classification: G11, G12


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Date posted: January 23, 2015 ; Last revised: April 16, 2015

Suggested Citation

Asness, Clifford S. and Frazzini, Andrea and Israel, Ronen and Moskowitz, Tobias J. and Pedersen, Lasse Heje, Size Matters, If You Control Your Junk (January 22, 2015). Fama-Miller Working Paper. Available at SSRN: http://ssrn.com/abstract=2553889 or http://dx.doi.org/10.2139/ssrn.2553889

Contact Information

Cliff S. Asness
AQR Capital Management, LLC ( email )
Two Greenwich Plaza, 3rd Floor
Greenwich, CT 06830
United States
203-742-3601 (Phone)
203-742-3101 (Fax)
HOME PAGE: http://www.aqrcapital.com

Andrea Frazzini
AQR Capital Management, LLC ( email )
Two Greenwich Plaza, 3rd Floor
Greenwich, CT 06830
United States
203-742-3894 (Phone)
203-742-3394 (Fax)
HOME PAGE: http://www.econ.yale.edu/~af227/

Ronen Israel
AQR Capital Management, LLC ( email )
Greenwich, CT
United States

Tobias J. Moskowitz (Contact Author)
AQR Capital ( email )
Greenwich, CT
United States

University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-834-2757 (Phone)
773-702-0458 (Fax)

Chicago Booth School of Business Logo

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Lasse Heje Pedersen
AQR Capital Management, LLC ( email )
Greenwich, CT
United States

Copenhagen Business School - Department of Finance ( email )
Solbjerg Plads 3
Frederiksberg, DK-2000
Denmark
New York University (NYU) ( email )
Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States
Centre for Economic Policy Research (CEPR) ( email )
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
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