Small Cap Premium Alive And Well

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    The small cap premium is alive and well, contrary to what some believe, says Robert T. Deere, an investment director and senior portfolio manager at Dimensional Funds. He told the session ‘Pursuing Premiums in Volatile Markets’ at its Toronto investment event that it has been that this premium has been elusive and returns disappointing in Canada and elsewhere in recent years. The controversy over its existence started because there was a negative small cap premium in 2014 of negative eight per cent. However, over the last 89 years, there has been a premium difference of plus or minus eight per cent about 45 per cent of the time in U.S. The premium has been impacted by a small group of unprofitable firms. When they are removed, the premium can be found, he said. However, the asset is a lot noisier than many realize which means investors need patience and should to diversify to other countries.