Small cap value may outperform
What happened
Research suggests small cap value could outperform large cap growth by 700 basis points annually over a decade, potentially doubling returns.
Why it matters
Small cap value's historical performance supports the claim, showcasing periods of significant outperformance following economic recoveries. This is due to their higher sensitivity to economic cycles and potential for rapid growth from a smaller base. However, increased volatility is a factor to consider. Small cap value stocks can experience sharper declines during economic downturns, requiring a longer investment horizon to realize potential gains. Dimensional Fund Advisors (DFA) emphasizes the importance of a disciplined, long-term approach to capture the small cap value premium. Their research indicates that consistent exposure, even during underperforming periods, is crucial for maximizing returns over the long run.
Key numbers
- Research suggests small cap value could outperform large cap growth by 700 basis points annually over a decade, potentially doubling returns.
What happens next
- Research suggests small cap value could outperform large cap growth by 700 basis points annually over a decade, potentially doubling returns.
Sources
Quick answers
What happened in Small cap value may outperform?
Research suggests small cap value could outperform large cap growth by 700 basis points annually over a decade, potentially doubling returns.
Why does Small cap value may outperform matter?
Small cap value's historical performance supports the claim, showcasing periods of significant outperformance following economic recoveries. This is due to their higher sensitivity to economic cycles and potential for rapid growth from a smaller base. However, increased volatility is a factor to consider. Small cap value stocks can experience sharper declines during economic downturns, requiring a longer investment horizon to realize potential gains. Dimensional Fund Advisors (DFA) emphasizes the importance of a disciplined, long-term approach to capture the small cap value premium. Their research indicates that consistent exposure, even during underperforming periods, is crucial for maximizing returns over the long run.
