Size matters everywhere: Decomposing the small country and small industry premia

Zaremba, Adam; Umutlu, Mehmet

Abstract

We explore the country and industry size effects by decomposing market value into four components: short-term return, representing momentum; long-run return, representing reversal; composite issuance; and lagged market value. We examine the implications of this decomposition for the country and industry size premia within a sample of 51 equity markets for the years 1973–2017. We confirm a significant size effect across countries and uncover an industry size effect: small industries markedly outperform large industries. While the cross-sectional dispersion in market value is determined almost exclusively by the lagged market value component, the country and industry size premia have two prmary drivers: lagged market value and long-run reversal. Our analysis also discovers an industry issuance effect and a remarkable January effect inboth country and industry returns. Finally we also shed some light on the vanishing small country effect in the last decade.

Citation

Zaremba, A., & Umutlu, M. (2018). Size matters everywhere: Decomposing the small country and small industry premia. North American Journal of Economics and Finance, 43, 1-18. https://doi.org/10.1016/j.najef.2017.09.002

• Journal Article Type: Article
• Acceptance Date: Sep 10, 2017
• Online Publication Date: Nov 22, 2017
• Publication Date: 2018-01
• Deposit Date: Jan 29, 2023
• Journal: The North American Journal of Economics and Finance
• Print ISSN: 1062-9408
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 43
• Pages: 1-18
• DOI: https://doi.org/10.1016/j.najef.2017.09.002
• Keywords: Country size effect, Industry size effect, Small country premium, Size premium, Asset pricing, International investment, Return predictability, Decomposition