Value Investing with Firm Size Restrictions: Evidence for the German Stock Market
Kaiser, L. 2014. Value Investing with Firm Size Restrictions: Evidence for the German Stock Market. International Journal of Economics and Finance, 6(6), 14-29
Posted: 11 Oct 2013 Last revised: 15 Oct 2016
Date Written: March 25, 2014
Recent findings by Fama and French (2012) suggest a decreasing pattern of value premia alongside an increase in firm size. Large trading volumes of value investors often restrict their investment possibilities to large, liquid stocks and raise a serious issue if large cap value premia are diminishing. Thereon, we test for the existence of value premia with respect to seven fundamental metrics subject to a large cap sample restriction. We provide evidence for the German stock market and observe statistically significant Carhart alphas across all tested value metrics between 1988 until 2012, even after accounting for the total market HML risk factor. Finally, we look at pre- and post-rebalancing months and observe significantly negative value premia before rebalancing and an opposite pattern for past rebalancing returns. Furthermore, we identify calendar effects for value premia when considering a 12-month holding period.
Keywords: Asset Pricing; Size; Value; Germany; Fama; French; Calendar Effects
JEL Classification: C10; G11; G14
Suggested Citation: Suggested Citation