Description
Archive 2026-211: The Size Effect Revisited: New Research and Implications for 2026 Discount Rates
**Webinar 211: Live Broadcast Date: March 25, 2026, 1:00-3:00 pm ET**
VPS STRAIGHTtalk Webinar Series:
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
- Publication Citations
- Access to a Video Recording of the Program
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