On computing mean returns and the small firm premium - Roll, R. (Elsevier)
The mean return computational method has a substantial effect on the estimated small firm premium. The buy-and-hold method, which best mimics actual investment experience, produces an estimated small-firm premium only one-half as large as the arithmetic and re-balanced methods which are often used in empirical studies. Similar biases can be expected in mean returns when securities are classified by any variable related to trading volume.
http://dx.doi.org/10.1016/0304-405X(83)90055-7
Keywords: Q