Schwert--Anomalies and Market Efficiency 5 and Rmt is the return on the CRSP value-weighted market portfolio of NYSE,Amex,and Nasdaq stocks.The intercept ai in (1)measures the average difference between the monthly return to the DFA fund and the return predicted by the CAPM.The market risk of the DFA fund,measured by Bi,is insignificantly different from 1.0 in the period January 1982-May 2002,as well as in each of the three subperiods,1982-1987,1988-1993,and 1994-2002.The estimates of abnormal monthly returns are between -0.2%and 0.4%per month,although none are reliably below zero. Thus,it seems that the small-firm anomaly has disappeared since the initial publication of the papers that discovered it.Alternatively,the differential risk premium for small-capitalization stocks has been much smaller since 1982 than it was during the period 1926-1982. The Turn-of-the-Year Effect Keim (1983)and Reinganum(1983)showed that much of the abnormal return to small firms (measured relative to the CAPM)occurs during the first two weeks in January.This anomaly became known as the "turn-of-the-year effect."Roll (1983)hypothesized that the higher volatility of small-capitalization stocks caused more of them to experience substantial short-term capital losses that investors might want to realize for income tax purposes before the end of the year.This selling pressure might reduce prices of small-cap stocks in December, leading to a rebound in early January as investors repurchase these stocks to reestablish their investment positions.4 There are many mechanisms that could mitigate the size of such an effect,including the choice of a tax year different from a calendar year,the incentive to establish short-term losses before December,and the opportunities for other investors to earn higher returns by providing liquidity in December.Schwert -- Anomalies and Market Efficiency 5 and Rmt is the return on the CRSP value-weighted market portfolio of NYSE, Amex, and Nasdaq stocks. The intercept ai in (1) measures the average difference between the monthly return to the DFA fund and the return predicted by the CAPM. The market risk of the DFA fund, measured by bi , is insignificantly different from 1.0 in the period January 1982 – May 2002, as well as in each of the three subperiods, 1982-1987, 1988-1993, and 1994-2002. The estimates of abnormal monthly returns are between -0.2% and 0.4% per month, although none are reliably below zero. Thus, it seems that the small-firm anomaly has disappeared since the initial publication of the papers that discovered it. Alternatively, the differential risk premium for small-capitalization stocks has been much smaller since 1982 than it was during the period 1926-1982. The Turn-of-the-Year Effect Keim (1983) and Reinganum (1983) showed that much of the abnormal return to small firms (measured relative to the CAPM) occurs during the first two weeks in January. This anomaly became known as the “turn-of-the-year effect.” Roll (1983) hypothesized that the higher volatility of small-capitalization stocks caused more of them to experience substantial short-term capital losses that investors might want to realize for income tax purposes before the end of the year. This selling pressure might reduce prices of small-cap stocks in December, leading to a rebound in early January as investors repurchase these stocks to reestablish their investment positions.4 4 There are many mechanisms that could mitigate the size of such an effect, including the choice of a tax year different from a calendar year, the incentive to establish short-term losses before December, and the opportunities for other investors to earn higher returns by providing liquidity in December