There has been much discussion of the small cap and value premiums recently. Has its popularity cannibalized its utility? Are large firms preventing a level playing field? Will the small cap and value premiums exist going forward?
This article does not address these concerns directly, but it does identify and analyze another potential issue that could diminish the utility of small cap exposures. In particular, I investigate how stock mispricing and misplacement could impact the performance of size-based indices.