Continuing Professional Education on Business Valuation & Litigation
Wednesday, March 25, 2026, 1:00 – 3:00 PM ET
The Size Effect Revisited: New Research and Implications for 2026 Discount Rates
Speaker: Carla Nunes, CFA, ABV
Webinar Description:
When estimating the cost of equity for small businesses, practitioners often encounter conflicting assertions regarding the existence, magnitude, and proper measurement of the size effect. Confusion persists between the “small-stock premium” and the beta-adjusted size premium, between arithmetic and geometric return estimators, and between theoretical asset pricing explanations and empirical evidence.
This extended session builds upon prior discussions of the size effect by:
- Providing a structured review of historical and contemporary academic evidence, including the evolution from early empirical findings to multifactor asset pricing frameworks.
- Distinguishing clearly between raw small-stock return spreads and beta-adjusted size premia within CAPM and multifactor contexts.
- Refreshing conceptually how the size effect is measured and which studies are typically used to estimate size premia in practice.
- Presenting updated empirical findings and extended Kroll research, including comparisons to Fama-French size data and other factor-based benchmarks.
- Translating academic and empirical findings into defensible, practice-oriented guidance for valuation, financial reporting, tax, and litigation contexts.
Carla Nunes, CFA, ABV will be providing a refresher on the beta-adjusted size premium and small stock premium (build-up method) are estimated. She will update session participants on recent academic empirical evidence about the size effect. She will also discuss the impact of ignoring size related risk adjustments when developing cost of equity capital estimates for small and closely held companies.
Learning Objectives:
After completing this session, attendees will be able to:
- Summarize recent academic developments and empirical findings regarding the size effect and its role in modern asset pricing models.
- Differentiate between the small-stock premium, beta-adjusted size premium, and the SMB factor, and explain how recent research has clarified these distinctions.
- Evaluate the implications of updated empirical evidence for the continued use (or modification) of traditional size premium adjustments in cost of equity estimation.
- Assess the strengths and limitations of contemporary size premium data sources, including multifactor datasets and proprietary studies.
- Apply updated size effect evidence to develop and defend a cost of equity estimate for a small company in valuation, financial reporting, or litigation contexts.
Handouts:
- VPS Webinar slides
- Following the webinar, attendees will have access to a video recording of the program
About the Presenter:
Carla S. Nunes, CFA, ABV is a Managing Director in the Office of Professional Practice at Kroll (formerly Duff & Phelps), with more than 25 years of experience in valuation, financial reporting, and tax matters. She provides firm-wide technical guidance and serves as Global Leader of Kroll’s Valuation Digital Solutions group, overseeing cost of capital thought leadership and data published in the Cost of Capital Navigator.
Carla previously worked in Valuation Advisory Services at Kroll and its predecessor firms, including PricewaterhouseCoopers and Standard & Poor’s, performing engagements primarily for financial reporting and tax purposes. Her experience spans purchase price allocations, goodwill impairment testing, M&A, corporate tax restructuring, debt analysis, and complex cross-border engagements across industries such as pharma & biotech, healthcare, specialty chemicals, industrial manufacturing, and gaming & hospitality.
A recognized authority on cost of capital, Carla has authored and co-authored numerous publications, including chapters in Cost of Capital: Applications and Examples (4th and 5th editions), the Valuation Handbook series, the Valuation Handbook – International Guide to Cost of Capital, and other industry texts. She co-created the Kroll Cost of Capital Navigator and co-authors Kroll’s annual U.S. and European Goodwill Impairment Studies, as well as its 2023 ESG and Global Investor Returns Study.
Carla is a frequent speaker at conferences, webinars, and leading business schools on cost of capital, ESG, goodwill impairment, and valuation. She has served as Practitioner Director on the Board of FMA International and participates in committees for iiBV, IMA, and IVSC. She holds an MBA in Finance from the University of Rochester’s Simon School, an honors degree from ISEG Lisbon, and completed advanced coursework for a Masters of Taxation from Villanova University School of Law. She holds the CFA and ABV credentials and earned an ESG Executive Certificate from The Wharton School.
Continuing Professional Education on Business Valuation & Litigation
Jim Hitchner’s Valuation Products and Services (VPS) provides tools to assist practitioners in business valuation, litigation services, and forensics and fraud.
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