Does Size Really Matter?

Author(s)

  • Jonathan Berk

    • Reference

    Financial Analysts Journal, September/October 1997, pp. 12-18

    Abstract

    If the size of the firm is measured correctly, there is no evidence that small firms earn higher returns. Yet this is not inconsistent with the empirical fact that firms with small { market values earn higher returns. Modern financial theory predicts that when there is no relation in the economy between firm size and return, there will be a negative relation between firm market value and return, that is, firms with small market values will have higher expected returns.

    This paper is an intuitive summary of the research reported in A Critique of Size Related Anomalies and An Empirical Re-examination of the Relation between Firm Size and Return. It was written with a practitioner audience in mind.