Firm Size and Turn-of-the-Year Effects in the OTC/NASDAQ Market.

This paper examines the turn-of-the-year effect, the firm size effect, and the relation between these two effects for a sample of over-the-counter stocks traded via the NASDAQ reporting system over the period 1973-85. The authors find results similar to those based solely on listed stocks. The importance of these findings stems from the existence of nontrivial differences between the characteristics of the over-the-counter/NASDAQ sample and the samples of listed firms examined previously in the literature. They also find that NASDAQ quoted bid-ask spreads are highly negatively correlated with firm size, are not highly seasonal, and are large enough to preclude trading profits based upon a knowledge of the seasonality of small firms' returns. Copyright 1989 by American Finance Association.