A Critique of Size-Related Anomalies
Year: 1995
Type: article
Abstract: This article argues that the size-related regularities in asset prices should not be regarded as anomalies. Indeed, the opposite result is demonstrated. Namely, a truly anomalous regularity would be if an inverse relation between size and return was not observed. We show theoretically (1) that the size-related regularities should be observed in the economy and (2) why size will in general explain the part of the cross-section of expected returns left unexplained by an incorrectly specified asset pricing model. In light of these results we argue that size-related measures should be used in cross-sectional tests to detect model misspecifications.
Source: Review of Financial Studies
DOI: 10.1093/rfs/8.2.275
Author: Jonathan B. Berk
Institution: University of British Columbia
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2132082635