By Matt Wagner, CFA, Modern Alpha Analyst
U.S. mid-caps have outperformed large-caps over the past decade.1
According to the efficient market hypothesis (EMH), this should tend to be the case over the long run. EMH says market prices reflect all available information, and any excess returns are simply a by-product of greater risk.
Let's run with this theory of higher risk being behind higher returns: How have riskier mid-caps done relative to less-risky mid-caps?
Mid-Cap Inefficiency?
The most straightforward way we can measure risk is by volatility, or standard deviation of returns. The least-volatile