The perceived health of the economy will be the key determinant of whether smallercompanies outperfo...
The perceived health of the economy will be the key determinant of whether smallercompanies outperform or underperform the rest of the stock market. It will drive other factors such as views on relative valuation, the level of take over activity and asset allocation. The performance of smaller companies over the past 12 months is testament to this. During the second half of 1998, the P/E ratio of smaller companies was significantly below that of the rest of the market and at one point they yielded more than gilts. Yet corporate activity and a greater interest in investing in smaller compan...
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