Does size matter? : Evidence from the Swedish stock market

Sammanfattning

The small firm effect (SFE) is a long-debated market anomaly that appears to have weakened or disappeared since the 1980s. Building on a recent study finding a re-emerged size-premium once quality is controlled for, this study tests whether a size-premium emerges in the Swedish market when controlling for market, value, momentum, and a comprehensive quality factor, additionally testing whether size-returns vary across the economic cycle. Using monthly factor return data between 1995-2025, and left-hand-side time-series regressions, we find no statistically significant size-premium. In additional specifications we exclude January, and condition in cycle phases, but find no size-premium regardless. However, adding the quality factor substantially increases the model fit (R^2 increase from 0.028 to 0.120) Furthermore, quality loads negative on the size-portfolio, with a t-statistic of -5.275. This study fails to find a size-premium, it does however find quality economically relevant in further understanding market return.