Forecasting the Size Premium Over Different Time Horizons

37 Pages Posted: 1 Nov 2011 Last revised: 6 Nov 2012

Valeriy Zakamulin

University of Agder - School of Business and Law

Date Written: October 31, 2011

Abstract

In this paper, we provide evidence that the small stock premium is predictable both in-sample and out-of-sample through the use of a set of lagged macroeconomic variables. We find that it is possible to forecast the size premium over time horizons that range from one month to one year. We demonstrate that the predictability of the size premium allows a portfolio manager to generate an economically and statistically significant active alpha.

Keywords: size effect, size premium, stock return predictability, active alpha

JEL Classification: C13, G12, G17

Suggested Citation

Zakamulin, Valeriy, Forecasting the Size Premium Over Different Time Horizons (October 31, 2011). Journal of Banking and Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1951931 or http://dx.doi.org/10.2139/ssrn.1951931

Valeriy Zakamulin (Contact Author)

University of Agder - School of Business and Law ( email )

Service Box 422
Kristiansand, N-4604
Norway
+47 38141039 (Phone)

HOME PAGE: http://vzakamulin.weebly.com/

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