Explaining Size Effect for Indian Stock Market

Asheesh Pandey () and Sanjay Sehgal ()
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Asheesh Pandey: Fortune Institute of International Business
Sanjay Sehgal: University of Delhi, South Campus

Asia-Pacific Financial Markets, 2016, vol. 23, issue 1, No 2, 45-68

Abstract: Abstract Using data for BSE 500 companies from October 2003 to January 2015, we confirm the presence of strong size effect in Indian stock market. Controlling for penny stocks, we find that returns decrease almost monotonically with firm size. The findings are robust for alternative size measures, i.e. market capitalization, total assets, net fixed assets, net working capital, net sales and enterprise value. We find the presence of non-synchronous trading bias and reverse seasonality effect. It is observed that market, size, value and business cycle factors explain size effect while liquidity and momentum factors have little role in this process. Thus, rational sources explain the size anomaly in the Indian context.

Keywords: Size effect; CAPM anomaly; Sources of size anomaly; Missing factor; Fama French (search for similar items in EconPapers)
JEL-codes: C13 C22 G11 G12 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (4)

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DOI: 10.1007/s10690-015-9208-0

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