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The small-cap effect in the predictability of individual stock returns

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  • Semenov, Andrei

Abstract

The paper investigates whether the choice of opening prices yields the same predictability of daily returns on individual stocks as the choice of closing prices. Based on the sample of NYSE, Nasdaq, and AMEX listed stocks for the period from January 2009 to November 2013, it is concluded that (a) the degree of predictability and implied forecasting accuracy of both types of returns substantially increase as smaller stocks are examined and (b) this increase is stronger for the open-to-open returns than for the close-to-close returns. This small-cap effect in the predictability of individual stock returns is stronger for the high-momentum stocks.

Suggested Citation

  • Semenov, Andrei, 2015. "The small-cap effect in the predictability of individual stock returns," International Review of Economics & Finance, Elsevier, vol. 38(C), pages 178-197.
    • Handle: RePEc:eee:reveco:v:38:y:2015:i:c:p:178-197
    DOI: 10.1016/j.iref.2015.02.020
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    2. Hao, Ying & Chu, Hsiang-Hui & Ho, Keng-Yu & Ko, Kuan-Cheng, 2016. "The 52-week high and momentum in the Taiwan stock market: Anchoring or recency biases?," International Review of Economics & Finance, Elsevier, vol. 43(C), pages 121-138.
    3. Xiang, Erwei & Gasbarro, Dominic & Cullen, Grant & Ruan, Wenjuan, 2020. "Does R&D expenditure volatility affect stock return?," Journal of Contemporary Accounting and Economics, Elsevier, vol. 16(3).
    4. Brandon Flores & Blessing Ofori-Atta & Andrey Sarantsev, 2021. "A stock market model based on CAPM and market size," Annals of Finance, Springer, vol. 17(3), pages 405-424, September.
    5. Sangram Keshari Jena & Aviral Kumar Tiwari & Ashutosh Dash & Emmanuel Joel Aikins Abakah, 2021. "Volatility Spillover Dynamics between Large-, Mid-, and Small-Cap Stocks in the Time-Frequency Domain: Implications for Portfolio Management," JRFM, MDPI, vol. 14(11), pages 1-22, November.

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    More about this item

    Keywords

    Close-to-close return; Open-to-open return; Random walk; Variance ratio;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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