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The case for the size premium

The case for the size premium

16-12-2016 | From the field

This AQR working paper argues that the size effect does, in fact, exist. The crucial element of their approach is to control for exposure to other factors when estimating the size premium, in particular regarding high quality versus low quality (junk) stocks.

  • David Blitz
    David
    Blitz
    Head of Quant Research

Using this approach, the authors conclude that a significant size premium emerges, which is stable through time, robust to the specification, more consistent across seasons and markets, not concentrated in microcaps, robust to non-price based measures of size, and not captured by an illiquidity premium.

We also highlight the importance of controlling for other well-known factor premiums when analyzing the size premium, not just quality, but also value, momentum and distress risk.

From the field
From the field

Onze onderzoekers publiceren veel whitepapers die zijn gebaseerd op hun eigen empirische onderzoek, maar ze kijken ook naar kwantitatief onderzoek dat door anderen is gedaan. David Blitz, hoofd Quant Equities Research, vertelt over opvallende externe papers.

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