41 Pages Posted: 30 Jan 2006 Last revised: 16 May 2011
Date Written: May 10, 2011
Beginning with Banz (1981), I review 30 years of research on the size effect in equity returns. Since Fama and French (1992), there has been a vigorous, ongoing debate on whether the size premium is a compensation for systematic risk. Since the late 1990s, research on the size effect has been characterized by two developments that are seemingly contradictory. At last, theoretical models have emerged in which the size effect arises endogenously as a result of systematic risk. However, recent empirical studies assert that the size effect has disappeared after the early 1980s. In this review, I address this disconnect between recent theoretical and empirical research.
Keywords: Size Effect, Cross-Section of Equity Returns, CAPM, Anomalies
JEL Classification: G12, G15, G31
Suggested Citation: Suggested Citation
Van Dijk, Mathijs A., Is Size Dead? A Review of the Size Effect in Equity Returns (May 10, 2011). Journal of Banking and Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=879282
By Stefan Koch