Size Matters, if You Control Your Junk

Clifford S. Asness, Andrea Frazzini, Ronen Israel, Lasse Heje Pedersen

Research output: Working paperResearch


The size premium has been challenged along many fronts: it has a weak historical record, varies significantly over time, in particular weakening after its discovery in the early 1980s, is concentrated among microcap stocks, predominantly resides in January, is not present for measures of size that do not rely on market prices, is weak internationally, and is subsumed by proxies for illiquidity. We find, however, that these challenges are dismantled when controlling for the quality, or the inverse "junk", of a firm. A significant size premium emerges, which is stable through time, robust to the specification, more consistent across seasons and markets, not concentrated in microcaps, robust to non-price based measures of size, and not captured by an illiquidity premium. Controlling for quality/junk also explains interactions between size and other return characteristics such as value and momentum.
Original languageEnglish
Place of PublicationLondon
PublisherCentre for Economic Policy Research
Number of pages58
Publication statusPublished - 2018
SeriesCentre for Economic Policy Research. Discussion Papers


  • Junk
  • Microcap
  • Quality
  • Size
  • Size anomaly
  • Size effect
  • Small cap

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