Small-Cap Value vs. Small-Cap Growth: 99 Years of Data

The short version

In Kenneth French’s research portfolios, U.S. small-cap value compounded at 14.2% a year from 1927 through 2025 and small-cap growth at 8.8%. Value won 98.5% of rolling 20-year windows. The exception is recent: over February 2004 to December 2025 the two portfolios tied at 8.4%, and the Vanguard and iShares small growth funds edged out their value siblings. The part of the gap that never went away is the smallest, most expensive growth stocks, which returned less than Treasury bills over 1990 to 2025. If you tilt toward small caps, tilt toward value and screen out unprofitable companies.

“Small-cap value or small-cap growth?” sounds like a question about style preference. The historical record makes it a question about which end of the small-cap market has earned its risk, and the answer depends on how far back you look and which stocks a fund holds. The figures below are my own calculation from French’s data library, and the script and data are public.¹

How the two portfolios are defined

Each June, Fama and French split U.S. stocks at the NYSE median market value into small and big, then sort each half by book-to-market ratio. The cheapest 30% (high book-to-market) is value; the most expensive 30% is growth. “Small value” and “small growth” below are those two small-cap corners, value-weighted, with no fees, trading costs or taxes. That makes them research portfolios, useful for measuring where returns came from. The fund comparison further down shows how much of the gap real products captured.

99 years of small value and small growth

1927-2025	Annualized return	Volatility	Worst drawdown	$1 grew to
Small value	14.16%	28.1%	−88.7%	$493,097
Small growth	8.81%	25.8%	−88.9%	$4,259
Large value	12.28%	24.6%	−89.2%	$95,100
Large growth	10.21%	18.3%	−81.7%	$15,156
Total market	10.27%	18.4%	−83.7%	$15,952
Treasury bills	3.29%	0.9%	−0.1%	$25

Source: author’s calculation from Kenneth French’s 2x3 size and book-to-market portfolios and Fama-French market and T-bill series, monthly, January 1927 to December 2025. Volatility is annualized monthly standard deviation. Worst drawdowns for every equity row occurred in 1929-1932.

The 5.35-percentage-point annual gap between small value and small growth is the widest of any pair in the table. Small growth also trailed large growth by 1.4 points a year while carrying more risk (25.8% volatility against 18.3%). Small value was the most volatile of the six, yet its worst drawdown was about the same as small growth’s.

What this says about the “small-cap premium”

Averaging the three small portfolios against the three big ones, the way the SMB factor is built, small stocks beat big stocks by about one point a year over the same 99 years (12.03% against 11.06%). Almost all of that comes from the value side. Small growth returned less than every big-stock portfolio. Anyone buying a small-cap fund for the size premium alone is buying a premium that lived mostly in the cheap half of small caps.

Decade by decade

Decade	Small value	Small growth	Gap	All small	All big
1930s	1.8%	4.5%	−2.7%	4.2%	−1.5%
1940s	21.3%	11.3%	+10.0%	15.7%	11.6%
1950s	20.2%	17.5%	+2.7%	18.8%	19.7%
1960s	15.7%	10.7%	+5.0%	13.3%	8.9%
1970s	15.0%	5.8%	+9.2%	10.4%	8.3%
1980s	21.2%	10.1%	+11.1%	17.1%	17.8%
1990s	16.3%	11.5%	+4.8%	14.6%	17.1%
2000s	10.4%	−1.5%	+11.9%	6.3%	2.2%
2010s	11.0%	12.6%	−1.6%	12.2%	13.1%
2020-2025	11.3%	9.7%	+1.6%	10.3%	14.6%

Annualized returns. The last row covers 2020 through 2025 only. Author’s calculation from Kenneth French’s data library.

Small value lost two decades out of ten: the 1930s, and the 2010s by 1.6 points a year. The two biggest wins came in the 1980s and the 2000s, the second of which was mostly the unwinding of the dot-com bubble. In 2000 through 2009 small growth lost 1.5% a year while small value made 10.4%.

How often value won, and the longest losing stretch

Holding period	Windows	Value won	Median gap	Worst gap
1 year	1,177	63.0%	+4.5 pts	−67.8 pts (to Feb 2000)
5 years	1,129	79.9%	+4.6 pts	−12.4 pts (to Jan 2021)
10 years	1,069	86.4%	+6.5 pts	−6.1 pts (to Dec 2020)
20 years	949	98.5%	+6.7 pts	−0.7 pts (to Oct 2025)

Overlapping windows stepped monthly within January 1927 to December 2025; gaps are annualized. Author’s calculation.

The longer the holding period, the more reliably value won, which is what a real premium with a lot of noise should look like. Two details in the table matter for anyone deciding today. First, the worst 20-year stretch in the whole record is the one that ended in October 2025: an investor who held small value for those 20 years trailed small growth by 0.7 points a year. Second, the worst 10-year and 5-year windows also ended in 2020 and 2021. The recent experience is the weakest in the data.

Measured another way, the ratio of small value’s wealth to small growth’s spent 138 months, from September 1932 to February 1944, below its previous high. That is the longest stretch in which a value investor had fallen behind and not yet caught up. Value beat growth in 59 of the 99 calendar years, so in four years out of ten a small value holder watched the other side win.

Where the gap comes from: the tiny growth corner

Splitting small caps more finely shows where the damage sits. In the 5x5 sort, the smallest fifth of stocks by size and the most expensive fifth by book-to-market compounded at 2.47% a year from 1927 to 2025, less than the 3.29% on Treasury bills, with 41% volatility and a 98.6% worst drawdown. The cheapest fifth of the same tiny stocks returned 15.89%.

Period	Tiny value	Tiny growth	Treasury bills
1927-1962	14.6%	−1.3%	1.3%
1963-2025	16.6%	4.7%	4.4%
1990-2025	14.5%	2.5%	2.7%
2000-2025	13.2%	1.0%	1.9%
2010-2025	13.7%	6.0%	1.3%

Annualized. Tiny growth and tiny value are the smallest-size quintile crossed with the lowest and highest book-to-market quintiles of the 5x5 sort. Author’s calculation from Kenneth French’s data library.

Fama and French ran into the same stocks from the other direction. In their 2015 five-factor paper, the main thing the model could not explain was the low average return of small stocks that behave like firms investing heavily despite weak profitability; they called those portfolios’ returns “lethal for the five-factor model.”² Asness, Frazzini, Israel, Moskowitz and Pedersen found the complementary result: once you control for quality, the size premium becomes stable over time and shows up across industries and 24 international markets.³ Read together, the evidence says small caps paid when investors avoided the expensive, unprofitable ones.

What index funds actually delivered

Research portfolios are not something you can buy. The funds below are, and their returns are net of fees with dividends reinvested.⁴

Window	Value fund	Growth fund	French small value / small growth
Aug 2000 to Dec 2025	IWN 8.82%	IWO 6.54%	10.57% / 6.57%
Feb 2004 to Dec 2025	VBR 9.15%, IJS 8.66%	VBK 9.37%, IJT 9.56%	8.45% / 8.44%
Oct 2019 to Dec 2025	AVUV 13.90%, VBR 10.57%	VBK 9.06%, IWO 9.33%	12.39% / 11.54%

Annualized total returns from month-end adjusted closes. IWN and IWO track the Russell 2000 Value and Growth indexes; VBR and VBK the Vanguard small-cap value and growth indexes; IJS and IJT the S&P SmallCap 600 Value and Growth; AVUV is actively managed. Windows start at the youngest fund’s first full month.

Three things stand out. Over February 2004 to December 2025 there was no premium to capture: French’s own portfolios tied, and the growth funds finished slightly ahead. That window starts after the dot-com unwind that produced most of the 2000s gap, and it contains the 2010s, the worst stretch in the record for small value.

Second, the Russell pair shows the gap most clearly. IWN beat IWO by 2.3 points a year from August 2000. The Russell 2000 has no earnings requirement, so its growth half holds more of the tiny unprofitable stocks from the table above. The S&P SmallCap 600 admits only companies with positive GAAP earnings over the latest quarter and the latest four quarters,⁵ which removes much of that corner from IJT before growth and value are ever split.

Third, AVUV, which screens small value stocks for profitability, returned 13.90% from October 2019 against 10.57% for VBR. Six years of one fund’s record is too short to separate skill from a lucky period, but the result points the same way as the research. The VBR vs. AVUV comparison covers the trade-off in more detail.

When small growth has won

Speculative booms. The worst one-year window for small value ended in February 2000, when small growth was ahead by 68 points. Booms end, and the 2000s reversed that year and more.
The 2010s. This was the second losing decade for small value, and the weakest 10- and 20-year windows in the record end in 2020 and 2025.
The Depression. Small value lost the 1930s by 2.7 points a year and did not regain its relative high until 1944.

None of these episodes produced a 20-year window in which small growth won by more than 0.7 points a year. That asymmetry is the argument for value if you are choosing one. It is also why a value investor needs to be able to hold through a decade of losing.

What to own

Already in a total-market fund? You own both halves in proportion to their market value. That is a sound default, and nothing here says you need to change it.
Adding a small-cap sleeve? Make it small value with a profitability screen, whether an index built on the S&P SmallCap 600 or a systematic fund such as AVUV or DFSV. The research favors value, and the screen removes the corner that dragged small growth down.
Considering a dedicated small growth fund? I would not add one. Over 99 years it was the worst-compensated equity exposure in the table, and the funds that track the Russell 2000 Growth hold the most of its weakest corner.
Unwilling to trail the market for ten years? Then skip the tilt entirely. The 2010s showed that a small value investor can trail for a full decade, and selling at the bottom of that stretch is worse than never tilting.

How Summitward helps

Portfolio analysis

Run a Fama-French factor regression on your own holdings to see how much size and value exposure you carry.

Open portfolio analysis

Frequently asked questions

Is small-cap value better than small-cap growth?

Over 1927 to 2025 in French’s research portfolios, small value returned 14.2% a year and small growth 8.8%, and value won 98.5% of rolling 20-year windows. Over February 2004 to December 2025 the two tied, so the advantage is a long-run tendency with long gaps in it.

What is the historical small-cap premium over large caps?

About one percentage point a year from 1927 to 2025, measured as the average of French’s three small portfolios (12.03%) against the three big ones (11.06%). Small value beat the big-stock average by about three points; small growth trailed it by more than two.

Why did small growth do so badly?

Most of the shortfall sits in the tiniest, most expensive stocks, which returned 2.47% a year from 1927 to 2025, less than Treasury bills. Fama and French trace the same stocks to firms that invest heavily while earning little.

Is VBR or VBK better?

From February 2004 to December 2025, VBK returned 9.37% a year and VBR 9.15%, a period in which the research portfolios also tied. For a deliberate small-cap tilt, the longer record favors value, and a profitability-screened value fund addresses the corner that hurt small growth.

Did small value beat the S&P 500 or the total market?

Over 1927 to 2025, small value returned 14.16% a year against 10.27% for the total market in French’s data. Over 2010 to 2025 it returned 11.1% against 14.1%, so the answer depends heavily on the window.

Key takeaways

From 1927 to 2025, small value compounded at 14.16% a year and small growth at 8.81% in Kenneth French’s research portfolios.
Value won 98.5% of rolling 20-year windows, but the weakest 5-, 10- and 20-year windows in the record all ended between 2020 and 2025.
The tiniest, most expensive stocks returned less than Treasury bills over the full record and over 1990 to 2025.
Real index funds tied or favored growth over 2004 to 2025; the Russell pair, which lacks an earnings screen, showed the widest value advantage.
If you add a small-cap tilt, make it profitable small value, and only if you can hold it through a losing decade.

Related guides

The Case for Small-Cap Value: why the premium might exist and how to access it.
VBR vs. AVUV: an index fund against a profitability-screened active fund.
Growth Stocks Do Not Mean Higher Expected Returns: why a fast-growing company can still be a poor investment.
Dividend Growth vs. Small-Cap Value: two popular tilts compared on factor exposure.
Fama-French Factor Analysis: measure the size and value loadings in your own portfolio.
Is Factor Investing Dead?: the case for and against tilting after a weak decade.

Sources

Kenneth R. French, Data Library: “6 Portfolios Formed on Size and Book-to-Market (2 x 3),” “25 Portfolios Formed on Size and Book-to-Market (5 x 5)” and “Fama/French 3 Factors,” monthly value-weighted returns, files built from the 202608 CRSP database, downloaded September 28, 2026. mba.tuck.dartmouth.edu. Script, data and full output: github.com/engineerinvestor/summitward-research.
Eugene F. Fama and Kenneth R. French, “A five-factor asset pricing model,” Journal of Financial Economics 116, no. 1 (2015): 1-22. doi.org/10.1016/j.jfineco.2014.10.010
Clifford S. Asness, Andrea Frazzini, Ronen Israel, Tobias J. Moskowitz and Lasse Heje Pedersen, “Size matters, if you control your junk,” Journal of Financial Economics 129, no. 3 (2018): 479-509. SSRN
Fund total returns: Yahoo Finance adjusted closing prices for IWN, IWO, VBR, VBK, IJS, IJT and AVUV, month end to month end, read September 28, 2026; computed in the same script.
S&P Dow Jones Indices, “S&P U.S. Indices Methodology” (eligibility: positive as-reported earnings in the most recent quarter and over the most recent four quarters). spglobal.com (PDF)

Author disclosure

I hold small-cap value funds, including Avantis funds, and have no relationship with any fund sponsor named here. Research portfolio returns are gross of all costs and are not investable. Past factor returns do not guarantee future ones.