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Small, Mid, and Large Cap Stocks

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What's the definition of a small cap, mid cap and large capitalization stocks and why do small caps typically return higher rates of return but with increased volatility?

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Solution Summary

The solution describes the difference between small, mid, and large cap stocks and explains why small cap stocks typically have a higher return but with increased volatility.

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The positioning of a firm into a small, mid, or large cap depends upon the total amount of market capitalization presented by the firm. The market capitalization is calculated by multiplying the number of shares outstanding by the share price. For example, if a firm's share price is $30 and there are 1 billion shares outstanding, the firm's total market capitalization ...

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