Is Size Dead? A Review of the Size Effect in Equity Returns

41 Pages Posted: 30 Jan 2006 Last revised: 16 May 2011

Mathijs A. Van Dijk

Erasmus University - Rotterdam School of Management; Erasmus Research Institute of Management (ERIM)

Date Written: May 10, 2011

Abstract

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

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

Mathijs A. Van Dijk (Contact Author)

Erasmus University - Rotterdam School of Management ( email )

P.O. Box 1738
Rotterdam, 3000 DR
Netherlands
+31 10 408 1124 (Phone)
+31 10 408 9017 (Fax)

HOME PAGE: http://mathijsavandijk.com/

Erasmus Research Institute of Management (ERIM)

P.O. Box 1738
3000 DR Rotterdam
Netherlands

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