An Empirical Study of the Definition of Small Firms in Chinese Stock Markets

Size effect in stock markets means that the portfolio of small firms gains extra return in the long run. Because of the stock structure in China, the definition of small firms in China is not clear. To clearly define small firms, especially for style investment, this thesis carried out an empirical study of Chinese stock markets. The result shows that, in China, the portfolio including the smallest 20% listed companies in term of total market value has the most notable characteristic of size effect.