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The Size Effect in Value and Momentum Factors: Implications for the Cross-section of International Stock Returns

Author

Listed:
  • Victoria Atanasov

    (VU University Amsterdam)

  • Thomas Nitschka

    (Swiss National Bank, Switzerland)

Abstract

We document a consistent and robust relation between expected equity premia and common risk factors constructed on the basis of small stocks. Empirically, we show that (i) small-stock components of traditional value and momentum factors capture patterns in returns on regional and global portfolios of stocks; (ii) size-effect models substantially outperform benchmark models in finance; (iii) global small-stock value and momentum components are priced but regional models lead to more accurate asset evaluations; (iv) funding liquidity risk is a partial explanation of these findings.

Suggested Citation

  • Victoria Atanasov & Thomas Nitschka, 2013. "The Size Effect in Value and Momentum Factors: Implications for the Cross-section of International Stock Returns," Tinbergen Institute Discussion Papers 13-180/IV/DSF66, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20130180
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    More about this item

    Keywords

    international stock returns; size; value; momentum;
    All these keywords.

    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

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