An analysis of the performance of factors in the Australian share market reveals some valuable insights for equity investors. Contrary to conventional wisdom, large capitalisation stocks have consistently beaten small-cap companies.
While most investor portfolios have exposure to one or more factors, some factors tend to deliver better risk-adjusted returns than others over the longer term. Traditionally, it is believed that small caps outperform large caps because they are growing faster, a conclusion most famously promoted by academics Eugene Fama and Kenneth French. Their research found investors were rewarded for the greater risk in backing more volatile smaller companies.
To read more, please click here.