Analysis On Size Effect In China's Market

Size effect(also known as the small firm effect)as one of market anomalies,is mainly observed in the stock market.Its main appearance is small size company tend to has small market value,while its return is higher than that of larger company(whose market value is large).In 1981,Banz found the existence of size effect from the U.S.stock market between 1926 and 1975 for the very first time.Subsequently,many scholars added new achievements to this research.Many scholars have examined the size effect in terms of other regions' stock market too.However,the existence of size effect is not determined according to the difference of the research period,the change of the regions and the research methods.Chinese scholars have also had a continuous study on the size effect of China's security market,their research has a prominent contribution to the analysis of the current situation of China's market anomalies.But I find that these studies are mainly concentrated in years before 2006,and the sample interval is mostly within 5 years.Since established at the end of 1990,China's market experienced a lot of twists and turns.Due to the lack of stock of stock samples at the early stage accompanied by the immature development of the market,the research results obtained can't fully effected on analysis of today's China market.As there are more and more stock samples due to the development in China's stock market,newer study results about size effect has been much more persuasive.This study was based on the data of China's A-stock market from June.1995 to June.2016,under the condition of being grouped by total market value,using Fama-Macbeth's crosssectional analysis and descriptive statistical analysis,finally found the size effect in China.Meanwhile,this paper also found that the existence of size effect is not continuous.From 2002 to 2006 returns and company size is positively related,size effects are not directly related to the type of market.Size effect is the most obvious in March.Also,we discussed the causes of size effect under China's unique background.Small sized enterprises' improvement at profitability,institutional investors' control on small-cap stocks,corporate restructuring,Chinese new year cuture and irrational consumer's heuristic bias are five important reasons to the formation of size effect.