Size matters everywhere: Decomposing the small country and small industry premia

Abstract

We explore the country and industry size effects by decomposing market value into four components: short-term return representing momentum, long-run return representing reversal, composite issuance, and lagged market value. We examine the implications of this decomposition for the country and industry size premia within a sample of 51 equity markets for the years 1973-2017. We confirm a significant size effect across countries and uncover an industry size effect: small industries markedly outperform large industries. While the cross-sectional dispersion in market value is determined almost exclusively by the lagged market value component the country and industry size premia have two prmary drivers: lagged market value and long-run reversal. Our analysis also discovers an industry issuance effect and a remarkable January effect inboth country and industry returns. Finally we also shed some light on the vanishing small country effect in the last decade. (C) 2017 Elsevier Inc. All rights reserved.