The Size Effect Revisited
We compare performance of US stocks based on their size (market capitalization). We regress alpha and beta over size and other factors for individual stocks in Standard & Poor 500, for randomly generated portfolios, and for Standard & Poor 400 Mid-Cap and 600 Small-Cap. The novelty of our research is that we compare exchange-traded funds (ETFs) consisting of large-, mid- and small-cap stocks, including international ETFs. Conclusions: Size and market exposure (beta) are inversely related (strong evidence for ETFs, weak for individual stocks). No conclusive evidence about dependence of excess return (alpha) on size, or international markets.