Small-cap premium
The observation that smaller companies on average returned more than large ones, and the explanation of that excess by extra risks rather than by a gift from the market.
How to read the number
It is paid for in liquidity and in the depth of declines: small names fall faster, recover later, and cost more to exit on a bad day.
When the metric lies
The estimate depends heavily on how the sample is assembled: excluding companies that left the exchange inflates the result, because it is mostly the worst ones that leave.
Also known as: size effect