Asset Pricing and Microcaps

Yuming Li ()
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Yuming Li: Department of Finance, College of Business and Economics, California State University

Annals of Economics and Finance, 2023, vol. 24, issue 1, 119-140

Abstract: I study the pricing power of the microcap stocks with characteristics including accruals, new share issues, momentum and volatility, in addition to asset growth and profitability. After adjusting for the market excess return, I find that the return spreads formed from microcap stocks subsume the pricing power of those formed from other stocks. A microcap-based factor model outperforms many alternative models. The results are consistent with what MacKinlay and Pastor (2000) find that the additional factor that completes the pricing job of a factor model is a portfolio weighted towards mispriced securities.

Keywords: Anomalies; Microcaps; Factor models (search for similar items in EconPapers)
JEL-codes: G11 G12 (search for similar items in EconPapers)
Date: 2023
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