TY - JOUR T1 - Small-Cap Allocations: <em>Timing the Entry</em> JF - The Journal of Portfolio Management DO - 10.3905/jpm.2020.1.169 SP - jpm.2020.1.169 AU - Eric Sorensen AU - Sebastian Lancetti Y1 - 2020/07/09 UR - https://pm-research.com/content/early/2020/07/09/jpm.2020.1.169.abstract N2 - This article examines the behavior of the small-capitalization stock return cycle. The authors compare the period 1980–2020 with a study for the period 1960–1995. They find that in earlier period small-cap stocks earned a return premium when the economy was rising, long-term rates were rising, the US dollar was rising, and market volatility was falling. During the last decade, a strong move in large-cap stocks dwarfed the small-cap premium. The authors conjecture that a change in the character of economic growth, rising long-term rates, and oversold small-cap conditions may reverse this.TOPICS: Portfolio theory, portfolio construction, wealth managementKey Findings• The small-cap premium appears to have waned in the last 20 years.• The premium is, however, still related to economic cycles.• Economic conditions and valuations now favor a small-stock premium. ER -