The survivorship bias, share price effect, and small firm effect in Canadian markets

Abstract

After controlling for survivorship bias, we examine the relation between average returns, firm size, and price levels for Canadian stocks during the 1975-1994 period. Our findings indicate that there is a significant inverse share price level effect in Canadian markets. When we compare the results of the overall sample with the groups of surviving firms and delisted stocks, the latter group shows strong performance for large-size, high-priced stocks. Evidence that supports an independent size effect is less clear for Canadian stocks. A small size effect exists only among the higher share price denominations, which suggests a confounded size-price effect. Although the delisted group returns are statistically different from those of the survivor and the overall groups, which implies some evidence of survivorship bias, the difference between the survivor group and the overall group is weak at best. © 2003 Elsevier Inc. All rights reserved.