The impact of share price on seasonality and size anomalies in Australian equity returns

Given the high correlation between a firm’s stock price and market capitalisation, it is possible that the well‐documented size anomaly is masking a share‐price effect. Using a seemingly unrelated regression model to accommodate contemporaneous correlation between portfolios, we estimate the separat...

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Bibliographic Details
Published in:Accounting and finance (Parkville) 2000-03, Vol.40 (1), p.33-50
Main Authors: Gaunt, Clive, Gray, Philip, McIvor, Julie
Format: Article
Language:English
Subjects:
Anomaly
Beta
Companies
Company size effect
Equity portfolios
Impact analysis
Investment
Multivariate regression methodology
Price effect
Rates of return
Regression analysis
Returns
Seasonality
Seemingly unrelated regression
Shares
Size effect
Statistics
Stock prices
Studies
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Summary:Given the high correlation between a firm’s stock price and market capitalisation, it is possible that the well‐documented size anomaly is masking a share‐price effect. Using a seemingly unrelated regression model to accommodate contemporaneous correlation between portfolios, we estimate the separate effects of firm size and share price on returns to Australian equity portfolios. The analysis is also extended to estimate seasonal components of size and price effects. Our major findings are: (i) firm size and share price have significant and independent effects on portfolio returns averaged over all months, (ii) the familiar negative relation between size and returns is confirmed across all months, and (iii) the relation between share price and returns is negative in July and positive in all other months (with the exception of January where no price effect occurs). These findings, which are consistent across sub‐periods and robust to method variations, highlight the need for future research to provide an economic foundation for the relation between average returns, size and price.
ISSN:0810-5391
1467-629X
DOI:10.1111/1467-629X.00034