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

See all articles by Lars Kaiser

Lars Kaiser

University of Liechtenstein

Date Written: March 25, 2014

Abstract

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

Kaiser, Lars, Value Investing with Firm Size Restrictions: Evidence for the German Stock Market (March 25, 2014). 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. Available at SSRN: https://ssrn.com/abstract=2338483 or http://dx.doi.org/10.2139/ssrn.2338483

Lars Kaiser (Contact Author)

University of Liechtenstein ( email )

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Liechtenstein
+423 265 1186 (Phone)

HOME PAGE: http://www.uni.li/lars.kaiser

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