Evidence-based investing research
Login Join
Value Investing Strategy (Strategy Overview)
Allocations for November 2026 (Final)
Cash TLT LQD SPY
Momentum Investing Strategy (Strategy Overview)
Allocations for November 2026 (Final)
1st ETF 2nd ETF 3rd ETF

Measuring the Size Effect with Capitalization-based ETFs

Steve LeCompte | | Posted in: Size Effect

Key Insight

IWM had a higher full-sample CAGR than SPY (May 2000–Mar 2022; monthly dividend-adjusted prices), but since March 2004 IWM's CAGR was 8.3% vs 10.1% for SPY, and IWM won 49% of months, offering little support for a reliably exploitable size effect.

Do popular capitalization-based exchange-traded funds (ETF) offer a reliable way to exploit an equity size effect? To investigate, we look at the difference in returns (small minus big) between:

  • iShares Russell 2000 Index (Smallcap) Index (IWM), and
  • SPDR S&P 500 (SPY)

Using monthly dividend-adjusted closing prices for these ETFs during May 2000 (limited by IWM) through March 2022, we find that:

Subscribe to Keep Reading

Get the research edge serious investors rely on.

  • 1,200+ research articles
  • Monthly strategy signals
  • 20+ years of backtested analysis
$17.99 /month

Cancel anytime

Subscribe Now

Or read this article free

Enter your email and we’ll send you a link. 3 premium articles a month, no password or card.

Further Reading

Size Effect Do Equal Weight ETFs Beat Cap Weight Counterparts? Eight equal-weight ETFs underperformed their cap-weight counterparts on CAGR (average 10.4% vs 11.9%; none matched its benchmark; available... Size Effect Alternative Proxy for Small Stocks in Measuring the Size Effect Since March 2004, CAGRs for IJR (S&P 600 small-cap ETF) and IWM (Russell 2000 ETF) were 9.2% and... Equity Premium, Momentum Investing, Size Effect, Value Premium, Volatility Effects Are Equity Multifactor ETFs Working? Equal-weighted portfolio of eight multifactor ETFs underperformed an equal-weighted portfolio of their benchmarks (IWB, ACWX, SPY, MDY, IWV):... Value Premium Measuring the Value Premium with Value and Growth ETFs Value-minus-growth ETF returns did not show a reliable value premium; average annual V–G premiums were -0.7% (small), -1.0%... Calendar Effects, Size Effect, Value Premium Style Performance by Calendar Month Style ETFs show modest monthly return differences versus SPY, with value outperforming growth in Mar/Apr/Dec and growth leading... Equity Premium U.S. Equity Premium? SPY-minus-EFA relative returns were mostly negative until the 2008-2009 crisis and mostly positive afterward, and SPY is ahead...