THE EFFECTS OF FIRM SIZE ON RISK AND RETURN IN THE BRAZILIAN STOCK MARKET: A SECTORAL ANALYSIS

The theory of capital market is to deal with the equilibrium relationship between risk and expected return on risky assets. Based on the theory, the present study investigates the effects of sectoral size (sectoral capitalization) on risk and expected return for the period of 2000-2004 as monthly. Multifactor model is utilized in the study using the Arbitrage Pricing Theory in analyzing the effects of sectoral size on the risk and return by utilizing the ordinary least square estimation procedure. The findings indicate that the firm size or sector have insignificant effects on firm or sectoral return in the Brazilian stock market.