Find anomallies in the stockmarket
1. The Size Anomaly: The Small-Cap Premium The size anomaly is the observation that smaller-cap companies (those with lower total market capitalization) tend to generate higher risk-adjusted returns than large-cap companies over long periods. Anomaly Detail Strategy Why the Anomaly Exists Observation Smallest 20% of stocks often outperform the largest 20% over 50+ year periods. Liquidity Risk: Small-cap stocks are often harder to buy and sell without moving the price, demanding a higher return premium for investors. Exploitation Dedicated Small-Cap Value Funds: Focus on companies that are both small and have low valuations (Value is often combined with Size for better results). Information Gap: Large Wall Street firms cover big companies exhaustively. Less research is dedicated to small firms, creating opportunities for dedicated analysts to find undervalued companies. Modern Caveat The size premium has been weak or non-existent in the last decade, leading many to believe th...