Past performance bodes well forsmaller companies

The history of investing in UK small caps has been a happy one. The London Business School, together with ABN Amro, has compiled data on their performance since 1955, which shows that UK smaller companies have outperformed compared to the wider market. For instance, the Hoare Govett Smaller Companies Index (HGSC Index), which measures the performance of the lowest 10th by market capitalisation of the main UK equity market, increased at an annualised rate of 15.7% over the 48 years to end 2002. The chart on the right sets out the distribution of annual size returns by deducting the ret...