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

Adam Zaremba and Mehmet Umutlu

The North American Journal of Economics and Finance, 2018, vol. 43, issue C, 1-18

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.

Keywords: Country size effect; Industry size effect; Small country premium; Size premium; Asset pricing; International investment; Return predictability; Decomposition (search for similar items in EconPapers)
JEL-codes: G12 G15 (search for similar items in EconPapers)
Date: 2018
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