Originally Posted by NW-Bound
Didn't Farma and French show that small-cap value stocks outperform over long periods?
Of course small-cap values do not do that every year. My point was that no segments outperform all the time.
Yes. Supposedly cheap (as in, low book value) & small outperform consistently with long intermediate underperforming stretches.
Greenblatt claims cheap (as in, low P/E) and high ROIC works.
All those make sense: big companies can't go 10x as easy as small companies, a high ROIC indicates a company with a winning business model, and low competition. Cheap doesn't need explanation I guess.
The volatility however in aggregate goes up as well. Small companies go bust more easily, for example.