PT - JOURNAL ARTICLE AU - Eric Sorensen AU - Sebastian Lancetti TI - Small-Cap Allocations: <em>Timing the Entry</em> AID - 10.3905/jpm.2020.1.169 DP - 2020 Aug 31 TA - The Journal of Portfolio Management PG - 51--63 VI - 46 IP - 8 4099 - https://pm-research.com/content/46/8/51.short 4100 - https://pm-research.com/content/46/8/51.full AB - 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 the 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.