Does Firm Size Affect Stock Returns? Evidence from the Zimbabwe Stock Exchange
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Date
2014-11
Journal Title
Journal ISSN
Volume Title
Publisher
Academy of Business and Retail Management
Abstract
The objective of the study is to investigate the relationship between firm size and stock returns for firms
listed on the Zimbabwe Stock Exchange (ZSE) between June 2009 and July 2013. We adopt the regression
model employed by Banz in 1981, with innovations. The regression is based on constructed portfolios,
with market capitalization as the basis for portfolio construction. The portfolios comprise at most 5 stocks,
and stocks are sorted in ascending order by market capitalization for selection into portfolios. The sample
period spans from June 2009 to July 2013. We select the sample period beginning from 2009 because that
is when the government of Zimbabwe demonetized the Zimbabwean dollar and adopted a basket of foreign
currencies as legal tender. The data prior to 2009 is also distorted by hyperinflation and therefore is not
reliable. The sample size covers 64 companies listed on the ZSE, of which 60 are industrial and 4 are
mining companies. We find that the estimated coefficient for the firm size factor is not significant at the
5% level of significance. Therefore, firm size has a positive yet insignificant effect on stock returns for
companies listed on the ZSE for the period June 2009 to July 2013. Contrary to the general empirical
findings, larger firms on the ZSE tend to exhibit higher risk-adjusted returns than smaller firms.
Description
A Journal Article on the Effect of Firm Size on Stork Returns. With Evidence from the Zimbabwe Stock Exchange
Keywords
Stock exchange, Zimbabwe stock exchange, Firm size, Portfolio, Stork return
Citation
Mazviona, B. W. Nyangara, D. 2014 Does Firm Size Affect Stock Returns? Evidence from the Zimbabwe Stock Exchange. International Journal of Business and Economic Development, Vol. 2 Number 3: 13-17