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Firm size and cyclical variations in stock returns

Gabriel Perez-Quiros and Allan Timmermann
Authors registered in the RePEc Author Service: Gabriel Perez Quiros

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Recent imperfect capital market theories predict the presence of asymmetries in the variation of small and large firms' risk over the economic cycle. Small firms with little collateral should be more strongly affected by tighter credit market conditions in a recession state than large, better collateralized ones. This paper adopts a flexible econometric model to analyse these implications empirically. Consistent with theory, small firms display the highest degree of asymmetry in their risk across recession and expansion states and this translates into a higher sensitivity of these firms' expected stock returns with respect to variables that measure credit market conditions.

JEL-codes: G10 G20 G30 (search for similar items in EconPapers)
Pages: 58 pages
Date: 1999-09-01
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http://eprints.lse.ac.uk/119113/ Open access version. (application/pdf)

Related works:
Journal Article: Firm Size and Cyclical Variations in Stock Returns (2000) Downloads
Working Paper: Firm Size and Cyclical Variations in Stock Returns (1999) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:119113

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