FMBM - 3 Tips To Generate Alpha In Smaller Stocks
Stocks with a tiny market capitalization trading with low liquidity is where alpha lives and breeds. This isn’t just my viewpoint – it is a well-documented fact. The 2018 white paper, Replicating Anomalies, highlighted this finding:
Microcaps have the highest equal-weighted returns and the largest cross-sectional dispersions in returns and in anomaly variables."
The key for me is the last part pertaining to anomalies. As a quantitative researcher that digs deep for anomalies, I know of no other area in the market with higher potential for market-beating returns. But be forewarned, blindly buying small