A new insight into value premium and size premium

Analysing Indian equity data from 1995 to 2014, we conclude that median portfolios, which have received little attention from most researchers of value premium (VP) and size premium (SP), are quite pivotal. Mid-market-capitalisation portfolios exhibit zero VP and mid-price-to-book portfolios, zero SP. A move to lower market-capitalisation (MC) or price-to-book-ratio (PB) makes premium - VP or SP, as the case may be - positive; a move toward higher MC or PB makes the premium negative. This may be due to differences in the ways investors choose among small-MC and within big-MC, and weigh book-value vis-a-vis growth-potential. We believe this is a unique finding not, as yet, reported anywhere. (C) 2019 Published by Elsevier Ltd on behalf of Indian Institute of Management Bangalore.