Stock Price Dynamics and Firm Size: An Empirical investigation

Authors

  • YIN-WONG CHEUNG,

    Search for more papers by this author
    • Economics Board, University of California at Santa Cruz and Department of Finance, University of Texas at Austin, respectively. The first author acknowledges support from the GICES. We appreciate the comments and suggestions of Simon Benninga, Louis Chan, Ray Chou, Daniel Friedman, David Hsieh, Paul Laux, Jack Michaelsen, Danny Quah, Ehud Ronn, A. J. Senchack, the editor René Stulz, Seha Tinic, Sheridan Titman, an anonymous referee, and participants at the 1991 Western Finance Association meeting and the 1991 North American Summer Meeting of the Econometric Society. We also thank Serra Tinic for her expositional suggestions.

  • LILIAN K. NG

    Search for more papers by this author
    • Economics Board, University of California at Santa Cruz and Department of Finance, University of Texas at Austin, respectively. The first author acknowledges support from the GICES. We appreciate the comments and suggestions of Simon Benninga, Louis Chan, Ray Chou, Daniel Friedman, David Hsieh, Paul Laux, Jack Michaelsen, Danny Quah, Ehud Ronn, A. J. Senchack, the editor René Stulz, Seha Tinic, Sheridan Titman, an anonymous referee, and participants at the 1991 Western Finance Association meeting and the 1991 North American Summer Meeting of the Econometric Society. We also thank Serra Tinic for her expositional suggestions.


ABSTRACT

We show that after controlling for the effects of bid-ask spreads and trading volume the conditional future volatility of equity returns is negatively related to the level of stock price. This “leverage effect” is stronger for small, as compared to large, firms. We also document that while the essential characteristics of the relations between stock price dynamics and firm size are stable, the strengths of the relationships appear to change over time.

Ancillary