Equity Factor Investing: Size

Fadi Zaher ()
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Fadi Zaher: Index Solutions & Investment Specialists

Chapter 8 in Index Fund Management, 2019, pp 135-149 from Springer

Abstract: Abstract Small and mid-sized companies are classified as an investment style factor, known as the size factor. Smaller companies tend to have higher growth potential than large ones—it is easier for a small company to double its size relative to a large company. This chapter provides an insight into the size factor investing, how it is constructed and the drivers behind the factor’s risk and returns. The size factor, like other factors, requires patience, but also requires higher tolerance for volatility. It is undeniable that the size factor has worked over the long-term despite some period of underperformance in the past when compared to large capitalisation stocks and the broader market. Hence it is important to understand how the size factor is embedded in the overall portfolio and it works in conjunction with other factors.

Date: 2019
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DOI: 10.1007/978-3-030-19400-0_8

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