In a world where alpha can seem scarce, active small-cap managers continue to outperform their benchmarks at an impressive clip. But why? Investors have a general sense small caps are riskier and less efficient, but how or if these characteristics contribute to more alpha opportunities remains unclear.
QMA believes it’s critical to understand the sources of returns so investors can improve their chances of capturing them repeatedly. So, researchers recently studied QMA's own small-cap strategy and found that capturing alpha in small caps isn’t mysterious. It is largely the result of pervasive inefficiencies that create more pronounced mispricings that managers can regularly exploit, provided they have the skill and discipline to harvest it.
To read or download the paper, please click here. To talk to Gavin Smith at QMA, contact firstname.lastname@example.org.
10 March 2017
QMA: Start of Something Big: Demystifying the Source of Large Alpha in Small Caps