Long-Term Performance By Market Cap

Over the last eighty years, small-cap stocks have been the best-performing size category of stocks. I got this data from Professor Ken French’s Web site.
He divided the market into ten “size deciles.” What’s interesting is that it’s almost perfectly rank-ordered–the largest stocks did the worst, the smallest did the best.

The data covers from mid-1926 through November 2006. Here’s the annualized return by decile:
Lowest…………………13.588%
Third……………………12.504%
Fourth………………….12.371%
Fifth…………………….12.128%
Second………………..12.120%
Sixth……………………12.015%
Seventh………………..11.861%
Eight……………………11.414%
Ninth……………………10.950%
Biggest…………………9.703%
Here’s the same chart, but I divided all deciles by the largest decile (which is the flat line).

You can see that small-cap outperformance is very cyclical with the last “up” cycle starting seven years ago.

Posted by Eddy Elfenbein on January 10th, 2007 at 12:30 pm

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