John Martin Harmon



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In this study, I consider two important strategic investment issues: (1) firms size matters and (2) asset growth is a predictor of returns in the cross section. Empirically, I test two hypotheses: (1) Small firms outperform larger firms over long periods of time and (2) firms with the highest asset growth rates underperform firms with low asset growth rates over long periods of time. Both of the above hypotheses have been tested in previous academic studies but not for the period 2008-2017. This period includes a major economic and market recession in 2008 followed by a major market expansion continuing through 2017. With this bull market, however, market returns are uneven, with a flatter trading range year in 2011 and a down market year in 2015. As a result, I will also be able to see the effects of return variability on the asset size and asset growth portfolios. Following the approach taken by Eugene Fama and James Macbeth1, I compare the performance of large size firms to small size firms over the period 2008-2017. Using the 500 stocks included in the S&P 500 index as my sample universe. I develop portfolios of stocks based on asset size and use two investment strategies to make the performance comparisons: (1) Buy and Hold and (2) Rebalance (annually). To test the 2nd hypothesis, I follow the approach used by Michael Cooper et. al.2 and calculate asset growth rates for all S&P 500 stocks on a yearly basis from 2008-2017. Firms are sorted by asset growth rates, high to low, and placed in portfolios of 50 stocks each. The highest growth rate portfolio and the lowest growth rate portfolio returns are then compared on an annual and cumulative basis using buy and hold and portfolio rebalancing strategies. Return comparisons are also made against SPY, the S&P 500 SPDR ETF. Finally, using the information ratio, risk adjusted returns will be calculated for the asset size and growth portfolios to determine which portfolio models have the best risk-return outcomes.

Publication Date


Project Designation

Independent Research

Primary Advisor

Tony S. Caporale, Robert D. Dean

Primary Advisor's Department

Economics and Finance


Stander Symposium project

Asset Size, Asset Growth, and Stock Returns; an Empirical Analysis, 2008-2017