BUSI 4502 Lecture Notes - Lecture 8: Switching Barriers

• School: Carleton University
• Department: Business
• Course: BUSI 4502
• Professor: Bill Lawson

Document Summary

Article 27 the significance of market capitalization in portfolio management over time. Previous study has found that over the long run, small capitalization stocks outperform the large capitalization stocks even after standard measure of risk adjustment. However, other argues that small capitalization stocks do not solely contribute to the high performance. Hence, the main aim is to examine the relationship between market capitalization and return over long run investment horizons and document the importance of managing market capitalization exposure. The samples are new york stock exchange stocks from 1925 to 1998. Common stocks are ranked from smallest to largest and divide into 10 market capitalized decile portfolio based on sizes. Each portfolio has the same amount of securities. Holding period total return of each security is calculated and portfolio return is calculated by value weighting the annual return of stocks within portfolio.