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The Size Effect in Malaysia’s Stock Returns

In: Contemporary Issues in Finance, Investment and Banking in Malaysia

Author

Listed:
  • Syajarul Imna Mohd Amin

    (Universiti Kebangsaan Malaysia)

  • Aisyah Abdul-Rahman

    (Universiti Kebangsaan Malaysia)

  • Bakri Abdul Karim

    (Universiti Malaysia Sarawak)

Abstract

The size effect has been the most significant anomaly in stock price. Unlike developed stock markets, Malaysia’s market is smaller, less liquid, more volatile, prone to higher risk premiums and has higher cost of funds. These features could be attributed to informational inefficiency, high trading costs, and less competition. Nonetheless, investors have become interested in the Malaysian stock market for international diversification and potentially high returns. Thus, this research aims to examine the size effect in Malaysia’s cross-section of stock returns, involving 828 stocks listed in the FTSE Bursa Malaysia KLCI Index from January 2011 to December 2020. Fama–MacBeth-profitability regressions suggest that small firms and dividend payers perform better than large firms and non-dividend payers. Moreover, the small significant positive coefficient of lagged profitability suggests that Malaysian stock’s returns are not highly persistent. The findings would benefit investors, fund managers, and top management for portfolio diversification and risk management in Malaysia’s stock.

Suggested Citation

  • Syajarul Imna Mohd Amin & Aisyah Abdul-Rahman & Bakri Abdul Karim, 2024. "The Size Effect in Malaysia’s Stock Returns," Springer Books, in: Zulkefly Abdul Karim & Ruzita Abdul Rahim & Wai Yan Wong & Siti Farah Dilla Zakaria (ed.), Contemporary Issues in Finance, Investment and Banking in Malaysia, pages 55-63, Springer.
    • Handle: RePEc:spr:sprchp:978-981-99-5447-6_4
    DOI: 10.1007/978-981-99-5447-6_4
    as

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