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Forward-looking signals and the predictability of size effect in the Taiwan stock market

Author

Listed:
  • Ko, Kuan-Cheng
  • Wang, Shu-Feng
  • Lo, Wen-Chi
  • Tsai, Pei-Chun

Abstract

Guo (2023) finds that the size effect is predictable by the forward-looking signals, providing a plausible explanation for the disappearance of the size effect in the U.S. since its discovery. We obtain strong evidence that forward-looking signals are effective in predicting the size premium in Taiwan, where evidence of the size effect is inconclusive. In contrast to the U.S. evidence, this study shows that information barriers have limited impact on the predictable size effect in Taiwan. Moreover, stock illiquidity and limits-to-arbitrage based on limit-hit frequency provide better explanatory power for predicting the size effect in Taiwan.

Suggested Citation

  • Ko, Kuan-Cheng & Wang, Shu-Feng & Lo, Wen-Chi & Tsai, Pei-Chun, 2026. "Forward-looking signals and the predictability of size effect in the Taiwan stock market," Pacific-Basin Finance Journal, Elsevier, vol. 96(C).
    • Handle: RePEc:eee:pacfin:v:96:y:2026:i:c:s0927538x25003580
    DOI: 10.1016/j.pacfin.2025.103021
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    Keywords

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    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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