“Small-cap stocks have average negative alpha of 6 percent in the last six months of the past four bull markets. That’s among the worst-performing quant factors, which also include low P/E and dividend yield,” according to Bank of America Merrill Lynch in the Bloomberg article. “Other reasons to avoid small caps include earnings growth that has lagged large caps, potential for higher volatility in 2018 and their history of underperforming in a falling ISM market.”
In the fourth quarter, investors have added nearly $1.1 billion to IJR and almost $1.17 billion to IWM.
For more information on small-capitalization stocks, visit our small-cap category.
Tom Lydon’s clients own shares of IWM.