This work examines the small-cap effect, a well-documented phenomenon in financial literature that highlights the tendency of small-cap stocks to outperform large-cap stocks. The study explores the evolution of this effect and its implications for asset pricing models within a modern market context. Using a monthly cross-sectional regression approach, the analysis aims to isolate the size factor by incorporating control variables such as Market-to-Book Value (MTBV) and other company-specific characteristics. The analysis provides insights into how the size factor has shifted in recent years, with a focus on geographical and sectoral differences. The results reveal a gradual weakening of the small-cap effect, suggesting that the increasing influence of large-cap stocks is altering the traditional dynamics of the equity market. This evolution calls for a reassessment of small-cap strategies to adapt to these changes. The thesis concludes with reflections on critical aspects of the methods adopted, highlighting how results may be influenced by various determinants.

Revisiting the Small Cap Effect: an empirical analysis using cross-sectional factors

ALBANESE, GIORGIO
2023/2024

Abstract

This work examines the small-cap effect, a well-documented phenomenon in financial literature that highlights the tendency of small-cap stocks to outperform large-cap stocks. The study explores the evolution of this effect and its implications for asset pricing models within a modern market context. Using a monthly cross-sectional regression approach, the analysis aims to isolate the size factor by incorporating control variables such as Market-to-Book Value (MTBV) and other company-specific characteristics. The analysis provides insights into how the size factor has shifted in recent years, with a focus on geographical and sectoral differences. The results reveal a gradual weakening of the small-cap effect, suggesting that the increasing influence of large-cap stocks is altering the traditional dynamics of the equity market. This evolution calls for a reassessment of small-cap strategies to adapt to these changes. The thesis concludes with reflections on critical aspects of the methods adopted, highlighting how results may be influenced by various determinants.
2023
Revisiting the Small Cap Effect: an empirical analysis using cross-sectional factors
Small Cap Effect
CS Factors
Factor Strength
Asset Pricing
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/20.500.12608/77749