Considerations for the “Forgotten Size Segment”: Mid-Caps

We ran a factor analysis that combines this portfolio allocation to WisdomTree Large-, Mid- and SmallCap Indexes in the same proportions as large, mid- and small caps appear in the Russell 3000 Index. The resulting factor exposures are listed in the table below.

Building Exposure to the Market Capitalization Size Spectrum

Dividend Blend: Simply put, the major attributes of the dividend blend, compared to the Russell 3000 Index, are 1) lower beta, 2) exposure to larger companies, and 3) a greater tilt toward the value style that is largely similar to the Russell 3000 Value Index.

Earnings Blend: The major attributes of the earnings blend, compared the Russell 3000 Index, are 1) slightly lower beta, 2) very similar size, and 3) very similar “core” allocation with a value factor similar to the Russell 3000 Index (core). The crucial point is that all of this was accomplished with nearly 100 basis points of incremental average annual performance.


In our research on smart beta, we used a factor model analysis to describe the exposure inherent in WisdomTree’s Index methodology. We believe a critical part of evaluating the smart beta approach is taking a look under the hood of the strategies. We hope this research and blog series helped frame why and how WisdomTree’s U.S. Index family achieved the results it did over the real-time period analyzed.
1Source: Eugene F. Fama and Kenneth R. French, “Size, Value, and Momentum in International Stock Returns,” 6/21/11.

Important Risks Related to this Article

Investments focusing on certain sectors and/or smaller companies increase their vulnerability to any single economic or regulatory development. This may result in greater share price volatility. Dividends are not guaranteed and a company’s future abilities to pay dividends may be limited. A company currently paying dividends may cease paying dividends at any time.

The Dow Jones U.S. Select Dividend Index is calculated, distributed and marketed by Dow Jones Indexes, a licensed trademark of CME Group Index Services LLC, and has been licensed for use.