Marlena Lee, PhD, Co-Head of Research – Dimensional Fund Advisors

Over the past two decades, the number of US-listed, publicly traded companies has decreased by half.¹ There are many theories about what might be driving the change, such as increasing mergers and acquisitions activity, competition from global exchanges for listings, or changes in public policy and the regulatory environment for listed companies.

Historically, small cap stocks have had higher average returns than large cap stocks. This return difference between small cap stocks and large cap stocks is known as the size premium. Investors may wonder whether fewer listed companies might impact the size premium.² Our latest research shows that, historically, neither the existence nor magnitude of the size premium have been related to the number of listed stocks.³Moreover, we believe investors should continue to expect a positive size premium over the long term.