Beta and Size Revisited: Evidence from the French Stock Market

Abstract

According to the size effect, small cap securities generally generate greater returns than those of large cap securities. Our study confirms that the size effect does exist in the French stock market, but the difference cannot be explained by the beta levels. It is important to recognize the sign of the excess market return when testing the beta-return relationship. A test of the beta return relationship on the sign of the excess market return finds a significant relationship between conditional beta and returns. However, it seems that the conditional beta does not explain the size effect.