NDLI: Markowitz efficiency and size effect: evidence from the UK stock market

Content Provider	Springer Nature Link
Author	Hwang, Tienyu Gao, Simon Owen, Heather
Copyright Year	2013
Abstract	Academics and practitioners have frequently debated the relationship between market capitalization and expected return. We apply the Markowitz efficient frontier approach to develop a portfolio performance measure that compares the return of a portfolio to its optimal return, using data from the UK stock market over the period 1985–2012. Our results show that there is a negative relationship between portfolio size and portfolio return during the period under study. When comparing actual portfolio return with achievable return for the same level of risk, we find that as the portfolio size expands, underperformance of the portfolio increases, i.e. the larger the portfolio size, the greater the underperformance. This indicates that Markowitz efficiency is difficult to achieve, particularly in large portfolios. Changing model parameters leads to alternative efficient frontiers that impact upon the measurement of performance. However, the use of alternative efficient frontiers does not affect our result of the size effect on the relative performance of portfolios. Our study shows that the size effect is present over the full period. Our findings also suggest that the excess returns found in small portfolios are likely to be associated with higher levels of diversifiable risk in comparison with larger portfolios. Furthermore, in contrast to other studies, we find no evidence to support the size reversal effect in the data.
Starting Page	721
Ending Page	750
Page Count	30
File Format	PDF
ISSN	0924865X
Journal	Review of Quantitative Finance and Accounting
Volume Number	43
Issue Number	4
e-ISSN	15737179
Language	English
Publisher	Springer US
Publisher Date	2013-07-28
Publisher Place	Boston
Access Restriction	One Nation One Subscription (ONOS)
Subject Keyword	Size effect Efficient frontier Minimum-variance portfolio Size reversal Finance/Investment/Banking Accounting/Auditing Econometrics Operations Research/Decision Theory
Content Type	Text
Resource Type	Article
Subject	Finance Accounting

Sl.	Authority	Responsibilities	Communication Details
1	Ministry of Education (GoI), Department of Higher Education	Sanctioning Authority	https://www.education.gov.in/ict-initiatives
2	Indian Institute of Technology Kharagpur	Host Institute of the Project: The host institute of the project is responsible for providing infrastructure support and hosting the project	https://www.iitkgp.ac.in
3	National Digital Library of India Office, Indian Institute of Technology Kharagpur	The administrative and infrastructural headquarters of the project	Dr. B. Sutradhar bsutra@ndl.gov.in
4	Project PI / Joint PI	Principal Investigator and Joint Principal Investigators of the project	Dr. B. Sutradhar bsutra@ndl.gov.in Prof. Saswat Chakrabarti will be added soon
5	Website/Portal (Helpdesk)	Queries regarding NDLI and its services	support@ndl.gov.in
6	Contents and Copyright Issues	Queries related to content curation and copyright issues	content@ndl.gov.in
7	National Digital Library of India Club (NDLI Club)	Queries related to NDLI Club formation, support, user awareness program, seminar/symposium, collaboration, social media, promotion, and outreach	clubsupport@ndl.gov.in
8	Digital Preservation Centre (DPC)	Assistance with digitizing and archiving copyright-free printed books	dpc@ndl.gov.in
9	IDR Setup or Support	Queries related to establishment and support of Institutional Digital Repository (IDR) and IDR workshops	idr@ndl.gov.in

Exchange traded funds, size-based portfolios, and market efficiency

The high-volume return premium: evidence from the Chinese stock market

Momentum trading, mean reversal and overreaction in Chinese stock market

Banking efficiency and stock market performance: an analysis of listed Indonesian banks

Is higher variance necessarily bad for investment?

New empirical evidence on the investment success of momentum strategies based on relative stock prices

Does long-term disequilibrium in stock price predict future returns?

Riding the yield curve: a spanning analysis

How prior realized outcomes affect portfolio decisions

Markowitz efficiency and size effect: evidence from the UK stock market

Similar Documents

Exchange traded funds, size-based portfolios, and market efficiency

The high-volume return premium: evidence from the Chinese stock market

Momentum trading, mean reversal and overreaction in Chinese stock market

Banking efficiency and stock market performance: an analysis of listed Indonesian banks

Is higher variance necessarily bad for investment?

New empirical evidence on the investment success of momentum strategies based on relative stock prices

Does long-term disequilibrium in stock price predict future returns?

Riding the yield curve: a spanning analysis

How prior realized outcomes affect portfolio decisions

Markowitz efficiency and size effect: evidence from the UK stock market