The Next Big Thing Could Be Really Small: An Introduction to Global Micro-Cap Stocks

12 Pages Posted: 31 Oct 2015

Date Written: August 2014

Abstract

Global micro-cap stocks have provided greater diversification benefits and a more robust long-term value premium than small- and mid- to large-cap stocks. Among the features contributing to these benefits for micro caps worldwide:

• a large, diverse universe with little sell-side research coverage • lower correlations between individual micro-cap stocks as well as other asset classes • a larger empirical value premium than other equity universes

Together, these attributes have created attractive opportunities for active managers. While some institutional investors have made moderate commitments to micro-cap stocks, the allocations have tended to be country or regionally focused. The opportunity set globally is vast and compelling.

Keywords: micro-cap stocks, value premium, global investing, active manager, valuation dispersion, return asymmetry

JEL Classification: G11, G22, G23, G31, G10, G14, G20, G30

Suggested Citation

Institute, Brandes, The Next Big Thing Could Be Really Small: An Introduction to Global Micro-Cap Stocks (August 2014). Brandes Institute Research Paper No. 2014-06. Available at SSRN: https://ssrn.com/abstract=2680367 or http://dx.doi.org/10.2139/ssrn.2680367

Brandes Institute (Contact Author)

Brandes Investment Partners ( email )

11988 El Camino Real, Suite 500
P.O. Box 919048
San Diego, CA 92191-9048
United States

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