Firm size and cyclical variations in stock returns

Perez-Quiros, Gabriel and Timmermann, Allan (1999) Firm size and cyclical variations in stock returns. Financial Markets Group Discussion Papers (335). Financial Markets Group, The London School of Economics and Political Science, London, UK.

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Abstract

Recent imperfect capital market theories predict the presence of asymmetries in the variation of small and large firms' risk over the economic cycle. Small firms with little collateral should be more strongly affected by tighter credit market conditions in a recession state than large, better collateralized ones. This paper adopts a flexible econometric model to analyse these implications empirically. Consistent with theory, small firms display the highest degree of asymmetry in their risk across recession and expansion states and this translates into a higher sensitivity of these firms' expected stock returns with respect to variables that measure credit market conditions.

Item Type:	Monograph (Discussion Paper)
Official URL:	https://www.fmg.ac.uk/
Additional Information:	© 1999 The Authors
Divisions:	Financial Markets Group
Subjects:	H Social Sciences > HC Economic History and Conditions H Social Sciences > HG Finance
JEL classification:	G - Financial Economics > G1 - General Financial Markets > G10 - General G - Financial Economics > G2 - Financial Institutions and Services > G20 - General G - Financial Economics > G3 - Corporate Finance and Governance > G30 - General
Date Deposited:	04 Jul 2023 11:18
Last Modified:	11 Dec 2024 19:47
URI:	http://eprints.lse.ac.uk/id/eprint/119113

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