Resurrecting the Size Effect: Firm Size, Profitability Shocks, and Expected Stock Returns

• 成果类型: Article
• 署名作者: Hou, Kewei; van Dijk, Mathijs A.
• 署名单位: University System of Ohio; Ohio State University; Erasmus University Rotterdam; Erasmus University Rotterdam - Excl Erasmus MC
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhy104
• 发表日期: 2019
• 页码: 2850
• 关键词: BOOK-TO-MARKET; cross-section; IMPLIED COST; variance decomposition; RISK; expectations; INVESTMENT; Dividends; survival; momentum

摘要

Many studies report that the size effect in the cross-section of stock returns disappeared after the early 1980s. This paper shows that its disappearance can be attributed to negative shocks to the profitability of small firms and positive shocks to big firms. After adjusting for the price impact of profitability shocks, we find a robust size effect in the cross-section of expected returns after the early 1980s. Our results highlight the importance of in-sample cash-flow shocks in understanding cross-sectional return predictability.