SDD - Small Caps Have Gotten Smaller

Finance students learn that small company investments that can provide excess returns versus less risky large cap, blue-chip stocks. The ‘size factor’ is one of the original components that Eugene Fama and Ken French used to develop their 3-factor model. It worked for quite some time, particularly during the inflationary period of the 1970s.

More recently, however, US small capitalization companies have substantially underperformed their large cap counterparts. We all know the narrative of the past ten years with large cap growth technology names growing year-by-year. Microsoft, Apple, Amazon, Google and Facebook make up the