Fact, Fiction, and the Size Effect
Fact, Fiction, and the Size Effect ArXiv ID: ssrn-3177539 “View on arXiv” Authors: Unknown Abstract In the earliest days of empirical work in academic finance, the size effect was the first market anomaly to challenge the standard asset pricing model and promp Keywords: Size Effect, Asset Pricing, Market Anomalies, Equity Valuation, Small Cap Stocks, Equities Complexity vs Empirical Score Math Complexity: 2.5/10 Empirical Rigor: 8.0/10 Quadrant: Street Traders Why: The paper primarily uses standard statistical tests on public datasets (like CRSP) and factor return data (Fama-French) to empirically dissect the size effect, with minimal advanced mathematical formalism beyond basic regression and performance metrics. flowchart TD A["Research Goal: Investigate the existence<br>and persistence of the Size Effect"] --> B["Data Inputs: Historical equity data,<br>CRSP database, Fama-French factors"] B --> C["Methodology: Portfolio Sorts<br>& Regression Analysis"] C --> D{"Computational Process:<br>Decomposing Size Premium"} D -- "Statistical Testing" --> E["Key Findings: Size Effect is<br>conditional on volatility & liquidity"] D -- "Out-of-Sample Validation" --> E E --> F["Outcome: Small-cap premium<br>diminishes after accounting for<br>risk factors & data snooping"]