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Firm size, economic risks, and the cross-section of international stock returns

Victoria Atanasov and Thomas Nitschka

The North American Journal of Economics and Finance, 2017, vol. 39, issue C, 110-126

Abstract: Recent empirical evidence from developed markets indicates a negative relation between value premium and firm size. We find that the value premium in small stocks is consistently priced in the cross-section of international returns, whereas the value premium in big stocks is not. Based on US data, we show that the small-stock value premium is associated with business cycle news and reflects changes in macroeconomic, especially credit market related risks. Our results hold true for regional and global equity markets and remain valid after controlling for firm characteristics and prominent profitability and investment factors.

Keywords: Stock returns; Firm size; Value premium; Macroeconomic risks (search for similar items in EconPapers)
JEL-codes: G11 G12 (search for similar items in EconPapers)
Date: 2017
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Handle: RePEc:eee:ecofin:v:39:y:2017:i:c:p:110-126