In our final installment of discussion of the Tweedy Browne publication What Has Worked In Investing, we’ll take a look at the relative performance of small-cap versus large cap stocks.

We addressed this subject in a recent article for Forbes that discussed the potential relative performance of small and large cap stocks in general terms as well as within the context of impending rate hikes. While, in recent years, we point out that small caps have trailed larger names, we also provide historical data showing that on the whole small-cap stocks have outperformed large caps. Our data also illustrated that, historically, small-cap stocks have outperformed during periods of rising interest rates.

The Tweedy report offers further evidence of the relative outperformance of small caps by providing results of studies that examined historical small cap return data and included stocks listed in the U.S. as well as in international markets (using varied sets of assumptions). Across the board, results showed that over time higher gains were realized by the small-cap asset class of stocks. Below are the result of a long term study from Rolf Banz, who ranked all NYSE listed companies according to market cap from 1926-1980. As the table shows the smaller the stock the better the long term returns.