Question

Do small-cap stocks perform better than mid-cap stocks and large-cap stocks? Explain.

Answer 1

Small cap stocks are companies with lesser market capitalisations. These are young companies with significant potential for growth. Although they come with higher risk and greater volatility than large cap and Mid Cap stocks they display better performance due to their higher growth rate. They are considered high risk stock due to their volatility especially in the short periods of time.

However since they have larger room for growth they are able to outperform large cap and midcap stocks.