From Eric Sloane’s Weather Almanac:

No one, I understand, has solved the riddle of why the moon looks bigger when it comes over the horizon than when it is overhead. This has been worrying mankind for centuries. If you take a camera shot of the moon near the horizon, it will look like a star instead of the moon, but look at it on the scene and the effect of size is almost overwhelming. It was once thought the illusion was caused by comparison of the moon to objects such as trees and houses along the horizon; but you get the same effect when the moon rises over an open sea.

My explanation of the illusion would lean toward color. The sun and moon are seen through a longitudinal mass of terrestrial dust, when close to the horizon, making them appear red; and although few people take it into consideration, color (particularly red) has definite motion effect. According to the early painters, blue recedes, yellow is motionless and red "comes toward you." By this rule, a room painted blue or bluish will appear larger because its walls will seem to go away from you. The same room painted in shades of red will appear smaller because its walls will "approach" you. The reverse applies to dress; a woman with a blue gown will look smaller, while the one with a red go will "grow larger" as you look at her. So I do believe that acceptance of the moon as being blue-white in our min eye is shocked by the appearance of a red moon, and color psychology takes over, distorting our night vision.