The size effect - an inverse relationship between firm size and stock return - has been a widely investigated anomaly during the
last 20 years. A possible explanation is said to be the miss-assessment of risk in asset pricing models. We found evidence of a
significant size effect when studying daily returns from the Stockholm Stock Exchange during the period 1985 to 2001. We
especially studied the effect in up, down and flat markets, and found that the size effect was mainly attributable to down markets.
This was achieved by dividing a value-weighted index into different markets through a combination of filtering and wave
identifying techniques. We also studied the seasonal patterns of the small firm effect and found empirical evidence of a
turn-of-the-year effect.