A Literature Review of the Size Effect

ArXiv ID: ssrn-1710076 “View on arXiv”

Authors: Unknown

Abstract

The size effect in finance literature refers to the observation that smaller firms have higher returns than larger firms, on average over long horizons. It also

Keywords: Size effect, Small-cap premium, Asset pricing, Equity returns, Fama-French factors, Equities

Complexity vs Empirical Score

• Math Complexity: 2.0/10
• Empirical Rigor: 3.0/10
• Quadrant: Philosophers
• Why: The paper is a literature review summarizing existing findings with minimal original mathematical derivations or models, and while it discusses empirical results, it does not present new backtests, datasets, or implementation-heavy analysis.

  flowchart TD
    A["Research Goal<br>How does firm size impact equity returns?"] --> B["Methodology<br>Literature Review & Empirical Analysis"]
    B --> C["Data Sources<br>CRSP, Compustat, Fama-French Datasets"]
    C --> D["Computational Processes<br>Portfolio Sorts, Regression Analysis, Factor Models"]
    D --> E["Key Findings<br>Size Effect Exists but Varies by Market & Period"]
    E --> F["Outcomes<br>Small-Cap Premium Often Captured by HML Factor or Disappears in Large Caps"]