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Micro Caps, Factor Spreads, Structural Biases, and the Institutional Imperative, Factor Investor

https://www.factorinvestor.com/blog/micro-caps-factor-spreads-structural-biases-and-the-institutional-imperative
July 29, 2017

Ehren Stanhope, a principal with quantitative investment firm O'Shaughnessy Asset Management in the US, has crunched some numbers to highlight that "factor investing is more effective in micro than any other cap range".  See below his table on the performance of factors across the market cap spectrum. His point - instead of starting with large caps and working backwards in search of

excess returns, start in the most bountiful segment of the market and work up: "Investors should start building allocations where competition is low and alpha is less scarce—micro cap. "

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