It’s been well documented that small value stocks have provided some of the highest returns to investor portfolios over time. The following table provides annualized returns for various equity classes over the 87-year period from January 1927 to December 2013. The data is based on theFama-French data series and excludes utilities.
The dramatic outperformance of small value stocks relative to other asset classes has led many investors to consider including more exposure to them than the market’s overall exposure—about 2 percent. In addition to the large above-market return, the persistent outperformance of small value stocks has also been very high. Consider the following:
However, even these high rates of persistence demonstrate that it’s still possible you could wait out a 10-year investment horizon and have a significant chance that small value stocks will underperform other asset classes.
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