Firm Size and Cyclical Variations in Stock Returns

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

FMG Discussion Papers from Financial Markets Group

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 analyze 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.

Date: 1999-09
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Related works:
Journal Article: Firm Size and Cyclical Variations in Stock Returns (2000)
Working Paper: Firm size and cyclical variations in stock returns (1999)
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Persistent link: https://EconPapers.repec.org/RePEc:fmg:fmgdps:dp335

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