The Small-Cap Premium Still Lives on the Value Side

Historically, small-cap stocks have outperformed large-cap stocks. This difference is referred to in investment circles as the small-cap (aka small-company) premium. The discovery of the small-cap premium is credited to Rolf Banz’s 1981 Journal of Financial Economics study, “The Relationship Between Return and Market Value of Common Stocks.” I specifically bring Banz’s study up because…

 

How Much Small Cap Should Be in Your Portfolio?

This article originally appeared in the July 2014 issue of the AAII Journal. It may come as a surprise to those who have placed their nest eggs in an S&P 500 index fund, or an actively managed version thereof, that they are actually making a decision to exclude a significant portion of the equity universe. Academic…