The "Size Premium" in Equity Markets: Where is the Risk?

Content Provider	Semantic Scholar
Author	Ciliberti, S. S'eri'e, Emmanuel Simon, Guillaume Lemp'eriere, Yves Bouchaud, Jean-Philippe
Copyright Year	2017
Abstract	We find that when measured in terms of dollar-turnover, and once $\beta$-neutralised and Low-Vol neutralised, the Size Effect is alive and well. With a long term t-stat of $5.1$, the "Cold-Minus-Hot" (CMH) anomaly is certainly not less significant than other well-known factors such as Value or Quality. As compared to market-cap based SMB, CMH portfolios are much less anti-correlated to the Low-Vol anomaly. In contrast with standard risk premia, size-based portfolios are found to be virtually unskewed. In fact, the extreme risk of these portfolios is dominated by the large cap leg; small caps actually have a positive (rather than negative) skewness. The only argument that favours a risk premium interpretation at the individual stock level is that the extreme drawdowns are more frequent for small cap/turnover stocks, even after accounting for volatility. This idiosyncratic risk is however clearly diversifiable.
File Format	PDF HTM / HTML
DOI	10.2139/ssrn.3018454
Alternate Webpage(s)	https://arxiv.org/pdf/1708.00644v2.pdf
Alternate Webpage(s)	http://export.arxiv.org/pdf/1708.00644
Alternate Webpage(s)	https://doi.org/10.2139/ssrn.3018454
Language	English
Access Restriction	Open
Content Type	Text
Resource Type	Article