Value and Size Effects: Now You See it, Now You Don't

32 Pages Posted: 21 Mar 2002

See all articles by Frederiek Van Holle

Frederiek Van Holle

Degroof Petercam Asset Management

Jan Annaert

University of Antwerp Department of Accounting & Finance; University of Antwerp - Antwerp Management School

John Crombez

affiliation not provided to SSRN

Bart Spinel

affiliation not provided to SSRN

Date Written: February 2002

Abstract

The empirical finding that small stock returns exceed big stock returns (size premium), and that value stock returns exceed growth stock returns (value premium) has been extensively studied in the past. In this paper, we analyse the size premium and value premium for a cross-section of European stocks. The focus in this paper is on the evaluation of the robustness of the findings. We find a large size premium, but we also find that this premium only exists in the cross-section of the whole European market. If small and big stocks are selected relative to the market size of the country, the strategy is no longer profitable. As for the value premium, we find that the strategy is not profitable. When the value and growth portfolios are equally weighted there is a significant premium of about 7% on an annual basis. However, this premium is explained by the size effect. Finally, we observe that accounting for the look-ahead bias is important in the estimation of the value premium in Europe.

Keywords: book-to-market, size, value strategy

JEL Classification: G12, G15

Suggested Citation

Van Holle, Frederiek and Annaert, Jan and Crombez, John and Spinel, Bart, Value and Size Effects: Now You See it, Now You Don't (February 2002). EFA 2002 Berlin Meetings Discussion Paper. Available at SSRN: https://ssrn.com/abstract=302653 or http://dx.doi.org/10.2139/ssrn.302653

Frederiek Van Holle (Contact Author)

Degroof Petercam Asset Management ( email )

Rue Guimard 18
Brussels, 1040
Belgium
0032474400867 (Phone)

Jan Annaert

University of Antwerp Department of Accounting & Finance ( email )

Faculty of Applied Economics
Prinsstraat 13
Antwerp, B-2000
Belgium

HOME PAGE: http://https://www.uantwerp.be/en/staff/jan-annaert/

University of Antwerp - Antwerp Management School ( email )

Boogkeers 5
Antwerp, 2000
Belgium

John Crombez

affiliation not provided to SSRN

Bart Spinel

affiliation not provided to SSRN

No Address Available

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