The Evidence of Size Effect During Bull and Bear Markets

Most studies documenting an inverse relation between firm size and risk adjusted returns on stocks assume constant risk over time with the well known Constant Risk Model/ Capital Asset Pricing Model.This thesis examines the relationship between abnormal returns and the portfolio sizes as to determi...

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Main Author:	Mohd Yacob, Nathrah
Format:	Thesis
Language:	English English
Published:	2006
Subjects:	Stock exchanges - Malaysia - Kuala Lumpur. Risk-return relationships - Malaysia.
Online Access:	http://psasir.upm.edu.my/id/eprint/146/1/549133_t_gsm_2006_4.pdf
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spelling	my-upm-ir.1462013-05-27T06:45:58Z The Evidence of Size Effect During Bull and Bear Markets 2006-07 Mohd Yacob, Nathrah Most studies documenting an inverse relation between firm size and risk adjusted returns on stocks assume constant risk over time with the well known Constant Risk Model/ Capital Asset Pricing Model.This thesis examines the relationship between abnormal returns and the portfolio sizes as to determine if there is an existence of size effect although the risks are allowed to vary in different market conditions as with a different model known as the Varying Risk Model on Malaysian stock market.For comparison purposes, the Constant Risk Model is also being tested on the same data.The results indicated that there was an insignificant evidence of size effect on the sample selected that includes all companies listed in the Kuala Lumpur Stock Exchange Composite Index during the period from 1994 to 2003 with the used of Constant Risk Model. When the sample period was split into bull and bear months and the sample data were examined according to the months, there were significant differences of abnormal returns and systematic risks between bear and bull markets using the Varying Risk Model.In addition,with the inclusion of all months in the sample period, the reversal of size effect is seen during bear months when the largest firms’ portfolio outperformed the smallest firms’ portfolio.However, when the crisis period is excluded from the sample period,the size effect made its appearance during both market conditions.It is concluded that earlier reported performance of small firm stocks have been overstated because of an implied assumption of constant risks in bull and bear market.Benefit in investing in small firm stocks is significant only during January bear months.With these findings,fund managers and investors could play important roles by switching from the well known Constant Risk Model to Varying Risk Model in determining the right investment strategies that generate appreciable abnormal returns for their portfolios.The findings are also significant to the policy maker or regulators to set guidelines and regulations for stock market participants whether they are retail or institutional investors in investing in Malaysian stock market during different market conditions Stock exchanges - Malaysia - Kuala Lumpur. Risk-return relationships - Malaysia. 2006-07 Thesis http://psasir.upm.edu.my/id/eprint/146/ http://psasir.upm.edu.my/id/eprint/146/1/549133_t_gsm_2006_4.pdf application/pdf en public masters Universiti Putra Malaysia Stock exchanges - Malaysia - Kuala Lumpur. Risk-return relationships - Malaysia. Graduate School of Management English
institution	Universiti Putra Malaysia
collection	PSAS Institutional Repository
language	English English
topic	Stock exchanges - Malaysia - Kuala Lumpur. Risk-return relationships - Malaysia.
spellingShingle	Stock exchanges - Malaysia - Kuala Lumpur. Risk-return relationships - Malaysia. Mohd Yacob, Nathrah The Evidence of Size Effect During Bull and Bear Markets
description	Most studies documenting an inverse relation between firm size and risk adjusted returns on stocks assume constant risk over time with the well known Constant Risk Model/ Capital Asset Pricing Model.This thesis examines the relationship between abnormal returns and the portfolio sizes as to determine if there is an existence of size effect although the risks are allowed to vary in different market conditions as with a different model known as the Varying Risk Model on Malaysian stock market.For comparison purposes, the Constant Risk Model is also being tested on the same data.The results indicated that there was an insignificant evidence of size effect on the sample selected that includes all companies listed in the Kuala Lumpur Stock Exchange Composite Index during the period from 1994 to 2003 with the used of Constant Risk Model. When the sample period was split into bull and bear months and the sample data were examined according to the months, there were significant differences of abnormal returns and systematic risks between bear and bull markets using the Varying Risk Model.In addition,with the inclusion of all months in the sample period, the reversal of size effect is seen during bear months when the largest firms’ portfolio outperformed the smallest firms’ portfolio.However, when the crisis period is excluded from the sample period,the size effect made its appearance during both market conditions.It is concluded that earlier reported performance of small firm stocks have been overstated because of an implied assumption of constant risks in bull and bear market.Benefit in investing in small firm stocks is significant only during January bear months.With these findings,fund managers and investors could play important roles by switching from the well known Constant Risk Model to Varying Risk Model in determining the right investment strategies that generate appreciable abnormal returns for their portfolios.The findings are also significant to the policy maker or regulators to set guidelines and regulations for stock market participants whether they are retail or institutional investors in investing in Malaysian stock market during different market conditions
format	Thesis
qualification_level	Master's degree
author	Mohd Yacob, Nathrah
author_facet	Mohd Yacob, Nathrah
author_sort	Mohd Yacob, Nathrah
title	The Evidence of Size Effect During Bull and Bear Markets
title_short	The Evidence of Size Effect During Bull and Bear Markets
title_full	The Evidence of Size Effect During Bull and Bear Markets
title_fullStr	The Evidence of Size Effect During Bull and Bear Markets
title_full_unstemmed	The Evidence of Size Effect During Bull and Bear Markets
title_sort	evidence of size effect during bull and bear markets
granting_institution	Universiti Putra Malaysia
granting_department	Graduate School of Management
publishDate	2006
url	http://psasir.upm.edu.my/id/eprint/146/1/549133_t_gsm_2006_4.pdf
_version_	1747810146882420736

The Evidence of Size Effect During Bull and Bear Markets

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