Why has the size effect disappeared?

Ahn, Dong-Hyun; Min, Byoung-Kyu; Yoon, Bo-Hyun

doi:10.1016/j.jbankfin.2019.02.005

Cited by 19 publications

(7 citation statements)

References 58 publications

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“…Similarly, the value premiums are more pronounced in the longer investment horizons as compared to the shorter holding periods [ 37 ]. In this regard, Ahn, Min, and Yoon [ 38 ] report that although the unconditional size effect has disappeared after 1980s, the conditional premium depending on the economic cycles is still present. Several other studies have also found an association between size and value-group premiums and the economic cycles in the US [ 37 , 39 ] and UK markets [ 40 ].…”

Section: Literature Reviewmentioning

confidence: 99%

Deciphering equity style returns: An analysis of size and value anomalies in the Pakistani stock exchange

Kashif,

Chamadia,

Ahmed

et al. 2023

Heliyon

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Section: Literature Reviewmentioning

confidence: 99%

Deciphering equity style returns: An analysis of size and value anomalies in the Pakistani stock exchange

Kashif,

Chamadia,

Ahmed

et al. 2023

Heliyon

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“…After establishing our main results, we present additional findings that indicate our main threshold risk-return results are largely distinct from the Amihud (2002) illiquidity predictive results. Ahn et al (2019) document a relation between recessions and the subsequent equity size premium. They find that a reliably positive size premium is earned only at the trough of business cycles over their 1950-2012 sample.…”

Section: Intertemporal Risk-return Relations For Beta and Size Premiamentioning

confidence: 99%

“…Ahn et al (2019) document a relation between recessions and the subsequent equity size premium. They find that a reliably positive size premium is earned only at the trough of business cycles over their 1950–2012 sample.…”

Section: Related Literaturementioning

confidence: 99%

“…However, in Section 5, we show that a reliably positive equity size premium was not evident following recession months if there was not also a high‐volatility‐threshold breach. Further, the main economic troughs in Ahn et al (2019) are identified ex post by the NBER and capture only about 6% of the 1990–2017 sample period when VIX is available (with their 7‐month trough periods, defined as the trough month plus or minus 3 months). Conversely, our high‐volatility threshold identifies roughly 20% of the time as a high size‐premium state and we find similar results with an ex ante real‐time threshold identification method.…”

Section: Related Literaturementioning

confidence: 99%

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Beta and size equity premia following a high‐VIX threshold

Bansal

Connolly

Stivers

2022

Journal of Futures Markets

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We show that a positive risk premium from holding high‐beta stocks (vs. low‐beta stocks) and small‐cap stocks (vs. large‐cap stocks) is reliably earned only after the expected stock‐market volatility breaches a high threshold at about the 80th percentile. When exceeding this threshold at month , then sizable positive average returns from beta and size exposure are persistently evident over months to ; otherwise the premia are near zero. Conversely, we find no comparable threshold behavior for the Fama–French HML, RMW, and CMA factors. Our investigation suggests several economic channels as likely contributors behind these threshold risk‐return findings.

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“…Empirically, Lustig and Verdelhan (2012) and Pilotte and Sterbenz (2006) show that turning points of the business cycle are critically important in understanding business cycle variation of returns and volatilities for US equity and Treasury securities, respectively. Ahn et al (2019) show that the conditional size effect upon the business cycle turning points is important to understand why the size effect has disappeared after the early 1980s. Motivated by these studies, our analysis focuses on business cycle turning points, and aims to shed new light on the time-series aspects of profitabilities of momentum and reversals strategies.…”

mentioning

confidence: 99%

Momentum, Reversals, and Business Cycle Turning Points

Min¹,

Xiao²

2021

Abacus

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We study time variation in the profitabilities of medium-term momentum and long-term reversals trading strategies over the business cycle. We find reliable evidence that turning points in the business cycle are critically important in determining momentum and reversals profits. Specifically, momentum profits at business cycle peaks are higher than at business cycle troughs. The opposite pattern is found for reversals profits. Business cycle peaks show lower reversals profits than at troughs. The results indicate that momentum profits are not simply procyclical, but instead exhibit an intriguing and complex non-linear relation with macroeconomic conditions. We also find that the loser stocks are the primary determinant of time variation in momentum and reversals profitabilities across business cycles. Finally, our results remain robust after controlling for market state, cross-sectional return dispersion, and investor sentiment. Taken together, our findings pose challenges to existing theories of the momentum and reversals effects.

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Why has the size effect disappeared?

Cited by 19 publications

References 58 publications

Deciphering equity style returns: An analysis of size and value anomalies in the Pakistani stock exchange

Deciphering equity style returns: An analysis of size and value anomalies in the Pakistani stock exchange

Beta and size equity premia following a high‐VIX threshold

Momentum, Reversals, and Business Cycle Turning Points

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