Bringing a Style Lens to Small Caps

Another way to deepen our understanding of small-cap stocks is to look at them through a style-factor lens. As MSCI Research covered recently, style-factor indexes, such as value and growth, remain relevant as benchmarks to measure the performance of value- and growth-investing managers. So how has the style-factor dimension played out in the small-cap space?

Many market participants recognize that small caps and value companies have often played a strong part during economic recoveries, and this recovery has been no exception. The economic indicators and reopening of the global economy, following the roll-out of COVID-19 vaccines in November 2020, have marked a strong comeback in the performance of small-sized companies — which outperformed large- and mid-cap stocks across developed and emerging markets — and in the resurgence of value companies over their growth counterparts.

Another way to deepen our understanding of small-cap stocks is to look at them through a style-factor lens. As MSCI Research covered recently, style-factor indexes, such as value and growth, remain relevant as benchmarks to measure the performance of value- and growth-investing managers. So how has the style-factor dimension played out in the small-cap space?