publication . Bachelor thesis . 2014

Does size matter? : An empirical study modifying Fama & French's three factor model to detect size-effect based on turnover in the Swedish markets

Boros, Daniel; Eriksson, Claes;
Open Access English
  • Published: 01 Jan 2014
  • Publisher: Linköpings universitet, Nationalekonomi
  • Country: Sweden
Abstract
This thesis investigates whether the estimation of the cost of equity (or the expected return) in the Swedish market should incorporate an adjustment for a company’s size. This is what is commonly known as the size-effect, first presented by Banz (1980) and has later been a part of models for estimating cost of equity, such as Fama & French’s three factor model (1992). The Fama & French model was developed based on empirical research. Since the model was developed, the research on the size-effect has been divided and today there are empirical studies contradicting its existence. Arguments against the size-effect are to some extent supported by the fact t...
Subjects
free text keywords: Fama & French, Swedish markets
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