Firm size and cyclical variations in stock returns

Citation
G. Perez-quiros et A. Timmermann, Firm size and cyclical variations in stock returns, J FINANCE, 55(3), 2000, pp. 1229-1262
Citations number
49
Categorie Soggetti
Economics
Journal title
JOURNAL OF FINANCE
ISSN journal
00221082 → ACNP
Volume
55
Issue
3
Year of publication
2000
Pages
1229 - 1262
Database
ISI
SICI code
0022-1082(200006)55:3<1229:FSACVI>2.0.ZU;2-8
Abstract
Recent imperfect capital market theories predict the presence of asymmetrie s in the Variation of small and large firms' risk over the economic cycle. Small firms with little collateral should be more strongly affected by tigh ter credit market conditions in a recession state than large, better collat eralized ones. This paper adopts a flexible econometric model to analyze th ese implications empirically. Consistent with theory, small firms display t he highest degree of asymmetry in their risk across recession and expansion states, which translates into a higher sensitivity of their expected stock returns with respect to variables that measure credit market conditions.