Hedge Fund
Why Big Stocks Will Lead The Market
January 5, 2021
January 5, 2021
Year End Review
Why Big Stocks Will Lead the Market
By Robert Zuccaro, CFA
The events of 2020 accelerated changes in the stock market that were already underway. The long-standing belief that small stocks outperform large stocks over the long term is now being called into question. The past year has reinforced the case for investing in big stocks.
Small Stock Theory is under attack due to a sea change in the dynamics between big and small stocks. Historically, small stocks have provided higher returns than big stocks according to research findings at the University of Chicago in the late 1970s. Rolf Banz, a researcher at Chicago, explained this phenomenon as follows; ‘it works like aspirin, but no one knows why”.
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