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Measuring the Size Effect with Capitalization-based ETFs

Steve LeCompte | | Posted in: Size Effect

Do popular capitalization-based exchange-traded funds (ETF) offer a reliable way to exploit an equity size effect? To investigate, we look at the difference in returns (small minus big) between:

  • iShares Russell 2000 Index (Smallcap) Index (IWM), and
  • SPDR S&P 500 (SPY)

Using monthly dividend-adjusted closing prices for these ETFs during May 2000 (limited by IWM) through March 2022, we find that:

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