• Stocks of small companies tend to have higher incidences of price volatility and mispricing, increasing opportunities for investors to earn excess returns.
  • Implementing strategies, such as value or momentum, in the small-cap universe amplifies their alpha-generating potential.
  • High trading costs of small-cap stocks may disadvantage passive implementation when compared to skilled active management.

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The Author

Vitali Kalesnik

Director, Head of Equity Research, Research Affiliates

Noah Beck

Senior Researcher, Research Affiliates


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