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Small Firm Effect

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Small Firm Effect
A theory stating that publicly-traded companies with low market capitalization tend to outperform larger ones. Part of the small firm effect may be explained by the fact that these firms are riskier and, therefore, have higher returns. Additionally, small firms have lower stock prices and, thus, what would be a small price appreciation for a large firm can, in fact, be huge for a small firm. See also: Neglected-firm effect.
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Whaley, 1983, "Transactions Costs and the Small Firm Effect," Journal of Financial Economics 12, 57-79.
On the use of multifactor models to evaluate mutual fund performance by Huij, Joop; Verbeek, Marno / Financial Management
A Test of the Differential Information Hypothesis Explaining the Small Firm Effect.
Auditor reputation and the insurance hypothesis: the information ... by Hillison, William; Pacini, Carl / Journal of Managerial Issues
Many mutual funds and institutions subsequently exploit this small firm effect by purchasing small capitalization stocks.
Control versus firm value: the impact of restrictions on foreign ... by Lam, Swee-Sum / Financial Management
 
 
 
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