Does Active Management Work for Small-Cap Stocks?
17 David M. Blitzer and Srikant Dash It is commonly believed that active funds perform better than indices in the small-cap market because of that market’s relative inefficiency. In this article, we show that two issues-measurement techniques and benchmark selection-significantly affect any evaluation of active-management performance in small-caps. Specifically, we argue that correcting for survivorship bias, using asset-weighted fund returns, and substituting the S&P SmallCap 600 for the Russell 2000 as a benchmark paints a far less rosy picture of active management in small-caps than is commonly believed. Extreme Investing: Using Extreme Data to Find Value in Small-Cap Stocks 21 Brian Bruce and Daniel Morillo Researchers have looked into valuation effects for decades. Their research has usually focused on large-capitalization stocks. Not as much research has been done on valuations in small-capitalization stocks, as there is a tendency by many to associate small-capitalization stocks
