ABSTRACT The size effect has been analyzed in numerous stock markets using different approaches. However, there are few studies focused on its practical applicability. In this context, the aim of this study is two-fold. First, we examine price and volatility linkages among large, medium, and small firms employing a multivariate VAR-BEKK model. Second, we provide the out-of-sample performance of optimal portfolios constructed on the basis of time-varying return and volatility forecasts from this specification approach. Our overall results show that optimal portfolios are primarily composed of medium and small firms. Moreover, our findings reveal that using this technique, it is possible to reduce risk and outperform the naïve rule, which is usually employed by foreign investors interested in the Brazilian stock market. These findings are relevant not only for academics but also for practitioners because it is important an in-depth knowledge of stock market patterns in order to develop correct trading strategies.