Size effect alive or dead: Evidence from European markets

Pandey, Asheesh; Mittal, Anand; Mittal, Ayush

doi:10.1080/23322039.2021.1897224

Cited by 3 publications

(3 citation statements)

References 53 publications

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“…The value effect, size effect, small-firm effect, January effect, market overreaction, excess volatility, and return to average value are some of the most frequently investigated anomalies (Barbić 2010;Caporale et al 2019;Parveen et al 2020;Nurdina et al 2021). The size anomaly does not provide any opportunities for excess investor returns in Germany, Spain, and Italy, but provides an opportunity for size anomaly exploitation in France (Pandey et al 2021). The market overreaction anomaly shows that (Mishkin and Eakins 2003, p. 283) "research indicates that stock prices can overreact to announcements in the news and that pricing errors can only be remedied slowly.…”

Section: Efficient Marketmentioning

confidence: 98%

The Impact of Unsystematic Factors on Bitcoin Value

Merkaš

Roška

2021

JRFM

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The results of empirical analyses confirm that analysed unsystematic factors, the Stock-to-Flow index (S2F), and information on the Bitcoin (BTC) are directly correlated with BTC values. These results are expected and in line with the economic theory; however, this research paper aimed to investigate the impact of unsystematic factors on the value of decentralised virtual cryptocurrency BTC. Its aim was also to analyse the reasons for significant oscillations of market values in relation to the S2F and S2FX model and thus confirm the reliability of these models in the estimation of BTC value. The research further confirms the strong influence of non-technical information directly linked with the BTC. The limitations of this paper are the lack of possibilities for examining the impact of non-technical information affecting the Bitcoin price deviation regarding the S2F model. In addition to all mentioned limitations, the research results indicate the relevance of the S2F and S2FX models and show a strong impact of (half) the information on the value of cryptocurrencies.

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Section: Efficient Marketmentioning

confidence: 98%

The Impact of Unsystematic Factors on Bitcoin Value

Merkaš

Roška

2021

JRFM

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“…The size premium is not robust to how the size is measured (Berk, 1995(Berk, , 1996(Berk, , 1997Alquist et al, 2018). The evidence for the existence of the size premium in the stock markets of other countries is mixed (Cederburg and O'Doherty, 2015;Hilliard and Zhang, 2015;Pandey and Sehgal, 2016;Alquist et al, 2018;Pandey et al, 2021). The size premium does not apply to other asset types except stocks (Hassan, 2013;Levine et al, 2017;Richardson and Palhares, 2018;Alquist et al, 2018).…”

Section: Introductionmentioning

confidence: 99%

Size premium or size discount? – A dynamic capital mobility based interpretation

Song

2022

SEF

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Purpose The size effect that there exist return differences between small market-cap firms and large market-cap counterparts in the stock market has become one of the most controversial capital market anomalies. This paper aims to interpret this effect, including both the size premium and the size discount. Design/methodology/approach A dynamic capital mobility model (DCMM) is proposed, and the model’s explanatory ability is validated via simulation. Findings This study’s simulation results indicate that the observed size effect can be originated from the combination of the pure size effect and the investors’ herding behavior. Although the size premium, that average returns of small firms are higher than those of large firms, is more prevalent in the stock market, this study’s model implies that the size discount is also possible, which is largely an empirical issue. The pure size effect per se cannot reproduce the size premium. Only if the herding effect dominates the pure size effect would there exist the size premium. Originality/value Although the literature provides miscellaneous explanations for the size effect, they are still inconclusive. So far there has been no theory to directly investigate the size effect and to explicitly explore the impact of investors’ trading behavior on the size effect. To the best of the author’s knowledge, this paper fills in this gap and proposes a DCMM to interpret the size effect for the first time. In addition, while the literature focuses on the size premium only, this study covers not only the size premium but also the size discount.

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“…The various anomalies mentioned above have been significantly evaluated in asset pricing literature. In past literature, size effect has been found to be either diminished or dead (Crain, 2011; Michou et al, 2010; Nartea et al, 2009; Pandey & Sehgal, 2016; Pandey et al, 2021). However, recent work has again ignited the debate on size effect (Asness et al, 2018; Ciliberti et al, 2017; Leite et al, 2018).…”

Section: Introductionmentioning

confidence: 99%

Examining Asset Pricing Anomalies: Evidence from Europe

Pandey¹,

Joshi

2021

Business Perspectives and Research

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We examine five important asset pricing anomalies, namely, size, value, momentum, profitability, and investment rate to evaluate their efficacy in major West European economies, that is, France, Germany, Italy, and Spain. We employ four prominent asset pricing models, namely Capital Asset Pricing Model (CAPM), Fama–French three-factor (FF3) model, Carhart model and Fama–French five-factor (FF5) model to evaluate whether portfolio managers can create trading strategies to generate risk-adjusted extra normal returns for their investors. We also examine the prominent anomalies which pass the test of asset pricing in our sample countries and evaluate the best performing asset pricing model in explaining returns in each of these countries. We find that in spite of being matured markets, these countries provide portfolio managers with opportunities to exploit these strategies to generate extra normal returns for their investors. Momentum anomaly for Germany and profitability anomaly for Italy can be exploited by fund managers for generating risk-adjusted returns. For France, except for net investment rate anomaly, all the other anomalies remained unexplained by asset pricing models. We also find CAPM to be the better model in explaining returns of Italy and Spain. While FF3 factor and FF5 factor models explain returns in Germany, our sample asset pricing models failed to work for France. Our study has implications for portfolio managers, academia, and policymakers.

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Size effect alive or dead: Evidence from European markets

Cited by 3 publications

References 53 publications

The Impact of Unsystematic Factors on Bitcoin Value

The Impact of Unsystematic Factors on Bitcoin Value

Size premium or size discount? – A dynamic capital mobility based interpretation

Examining Asset Pricing Anomalies: Evidence from Europe

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