Below is a link to an article on investing in small cap stocks. The paper dispels the long held belief that small stocks outperform large cap stocks. The paper revisits and corrects prior studies that led investors to champion small cap stocks. These prior studies were distorted by pricing errors in the CRSP pricing database when a stock was delisted.
The study concludes that the small cap effect is weak at best and mostly explained away by higher beta and the value effect. I know several firms that drink the small-cap Kool-Aid. Should a client show concern at Crestwood’s modest allocation to small caps, this paper will support the construction of our models.
Thanks,
John