SIZE EFFECT AND STOCK BEHAVIOR DURING THE EXPANSION AND CONTRACTION PHASESOF ECONOMIC CYCLE An Empirical Evidence from Indonesian Stock Market

TL;DRAbstract

Banz (1981) and Reiganum (1981) claim that, in terms of return creation, smallfirms tend to perform better than large firms. They implicitly claim that the phenomena (which is known as size effect) is stable and exists over the period of examination. This study intends to investigate the existence of size effect in Indonesian market and more specifically, to test whether stages of economic cycle (expansion and contraction stages) determine the existence of the effect.\nThe results of the study show thdt size effect does exist in the market for the whole period of observation ( 1991-2001). However, when the period is divided into two parrs according to the stage of economic cycle, the statistical analysis results are not supportive to the conclusion about the size effect.\n\nKeywords: capital market

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