SMB - Arousal, disproportionate reactions and the size-premium

Robert Durand, A.R. Juricev, Gary Smith

Research output: Contribution to journalArticlepeer-review

17 Citations (Scopus)

Abstract

This paper examines SMB (small minus big), the mimicking portfolio in Fama and French's [Fama, E., French, K., 1993. Common risk factors in the returns on stocks and bonds, Journal of Financial Economics 33, 3–56] three-factor asset pricing model. We do not examine whether SMB is a factor in explaining the cross-section of returns. This paper's focus is why S is greater than B. After controlling for market-pervasive effects, we argue that the small-firm premium is driven by both investors' emotional arousal (proxied by the turnover ratio) and their disproportionate reactions to arousing stimuli.
Original languageEnglish
Pages (from-to)315-328
JournalPacific-Basin Finance Journal
Volume15
Issue number4
DOIs
Publication statusPublished - 2007

Fingerprint

Dive into the research topics of 'SMB - Arousal, disproportionate reactions and the size-premium'. Together they form a unique fingerprint.

Cite this