• 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

Disclosures

The above link has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Performance results shown are based on hypothetical modeling and are not indicative of the past or future performance of any PIMCO product. The hypothetical illustrations are based on information and sources PIMCO believes to be reliable, but not guaranteed and should not be relied upon for investment decisions. There is no guarantee that these investment strategies will work under all market conditions or are suitable for all investors and each investor should evaluate their ability to invest for the long term, especially during periods of downturn in the market. Investors should consult their investment professional prior to making an investment decision.