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Is There Really an Size Effect?

Posted in Size Effect

Do small market capitalization stocks really outperform big ones, as strongly implied by the prominence of the size effect in published research and factor models? In their May 2018 paper entitled "Fact, Fiction, and the Size Effect", Ron Alquist, Ronen Israel and Tobias Moskowitz survey the body of research on the size effect and employ simple tests to assess claims made about it. Based on published and peer-reviewed academic papers and on tests using data for U.S. stocks and equity factor premiums, international developed and emerging market stocks and stock indexes, U.S. bonds and various currencies as available through December 2017, they find that:

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