Strategy #0000000084 · Equity factors and firm size
Size effect and the small-cap premium
Enter small/large market caps and return assumptions to inspect the size ratio and cost-adjusted SMB scenario.
The size effect ranks firms by market capitalisation and studies whether small firms earn higher average returns than large firms; it also enters the Fama–French SMB factor. Historical effects may concentrate in microcaps, specific periods or January, and correlate with liquidity, age and analyst coverage. A size rank does not guarantee risk-adjusted excess returns.
Small-cap spreads, capacity and delisting data can make a paper premium difficult to realise.
Three ways in
Understand the story. Then inspect the risk.
Start with a familiar situation, check the payoff, then test how the numbers change.
The idea · in two minutes
How do market-cap size and assumed returns compare between small and large firms?
The size effect ranks firms by market capitalisation and studies whether small firms earn higher average returns than large firms; it also enters the Fama–French SMB factor. Historical effects may concentrate in microcaps, specific periods or January, and correlate with liquidity, age and analyst coverage. A size rank does not guarantee risk-adjusted excess returns.
Enter small/large market caps and return assumptions to inspect the size ratio and cost-adjusted SMB scenario.
Small-cap spreads, capacity and delisting data can make a paper premium difficult to realise.
- Signal metricEnter small/large market caps and return assumptions to inspect the size ratio and cost-adjusted SMB scenario.
- Return scenarioSmall-cap spreads, capacity and delisting data can make a paper premium difficult to realise.
Illustrative research examples only. They are not live signals or a recommendation.
The mechanics · payoff and exposure
SizeRatio=\frac{MarketCap_{large}}{MarketCap_{small}},\quad R_{SMB}=R_{small}-R_{big}-C
The size ratio describes relative scale only; basket returns are user inputs.
Greeks: the directional intuition
- 資料時點
- Measures sensitivity to implied volatility.
- 模型風險
- Measures sensitivity to implied volatility.
- 執行成本
- Measures sensitivity to implied volatility.
SizeRatio=\frac{MarketCap_{large}}{MarketCap_{small}},\quad R_{SMB}=R_{small}-R_{big}-C
Practical context · published observations
Size effect and the small-cap premium: read the record with its caveats.
The chart uses the published figures or explicitly labelled study inputs below. A historical index or model replay is not the same as an investor’s realised account return.
Small-cap spreads, capacity and delisting data can make a paper premium difficult to realise. Source ↗ · Methodology ↗
Change assumptions and inspect the scenario
Inputs illustrate the strategy mechanics; they are not live quotes, forecasts or investment advice.
Variants · same family, different risk levers
Related approaches use different horizons and data.
Compare ranking rules, holding periods and cost assumptions.
| Related strategy | Relationship | What changes | New cost or risk |
|---|---|---|---|
| Core version | Signal sort | The size effect ranks firms by market capitalisation and studies whether small firms earn higher average returns than large firms; it also enters the Fama–French SMB factor. Historical effects may concentrate in microcaps, specific periods or January, and correlate with liquidity, age and analyst coverage. A size rank does not guarantee risk-adjusted excess returns. | Small-cap spreads, capacity and delisting data can make a paper premium difficult to realise. |
| Industry-neutral version | Relative ranking | Compare firms within similar industries. | Classification and small samples affect signals. |
| Multi-signal version | Factor combination | Combine with quality or liquidity signals. | Adds weight, collinearity and data-mining risk. |
Small-cap spreads, capacity and delisting data can make a paper premium difficult to realise.
Read beyond the summary
References
Primary sources and research used to describe the strategy and its limits.