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Explaining Size Effect for Indian Stock Market

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  • Asheesh Pandey

    (Fortune Institute of International Business)

  • Sanjay Sehgal

    (University of Delhi, South Campus)

Abstract

Using data for BSE 500 companies from October 2003 to January 2015, we confirm the presence of strong size effect in Indian stock market. Controlling for penny stocks, we find that returns decrease almost monotonically with firm size. The findings are robust for alternative size measures, i.e. market capitalization, total assets, net fixed assets, net working capital, net sales and enterprise value. We find the presence of non-synchronous trading bias and reverse seasonality effect. It is observed that market, size, value and business cycle factors explain size effect while liquidity and momentum factors have little role in this process. Thus, rational sources explain the size anomaly in the Indian context.

Suggested Citation

  • Asheesh Pandey & Sanjay Sehgal, 2016. "Explaining Size Effect for Indian Stock Market," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 23(1), pages 45-68, March.
    • Handle: RePEc:kap:apfinm:v:23:y:2016:i:1:d:10.1007_s10690-015-9208-0
    DOI: 10.1007/s10690-015-9208-0
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    2. Tarunika Jain Agrawal & Sanjay Sehgal & Vibhuti Vasishth, 2020. "Firm Attributes, Corporate Fundamentals and Investment Strategies: An Empirical Study for Indian Stock Market," Management and Labour Studies, XLRI Jamshedpur, School of Business Management & Human Resources, vol. 45(3), pages 366-387, August.
    3. Vibhuti Vasishth & Sanjay Sehgal & Gagan Sharma, 2021. "Size Effect in Indian Equity Market: Myth or Reality?," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 28(1), pages 101-119, March.
    4. Gagan Sharma & Srividya Subramaniam & Sanjay Sehgal, 2021. "Are Prominent Equity Market Anomalies in India Fading Away?," Global Business Review, International Management Institute, vol. 22(1), pages 255-270, February.

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    More about this item

    Keywords

    Size effect; CAPM anomaly; Sources of size anomaly; Missing factor; Fama French;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • 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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