%0 Journal Article %A Wei Ge %T The Curious Case of the Mid-Cap Premium %D 2018 %R 10.3905/jii.2018.8.4.022 %J The Journal of Index Investing %P 22-30 %V 8 %N 4 %X Although many mutual fund families and exchanged-traded fund vendors offer mid-cap equity funds, research interest in mid-cap equities has been lacking. This phenomenon may be a result of behavioral patterns: Most equity analysts focus on the largest companies, and the popularity of the Fama–French factors stimulates enthusiasm for small equities. The mid-cap equities, however, may benefit from this lack of interest with good prospective performance. This article examines three popular U.S. mid-cap equity indexes, the Russell Mid-Cap Index, the CRSP Mid-Cap Index, and the S&P 400 Mid-Cap Index, analyzing their compositions, performance statistics, factor exposures, and potential roles in portfolios. The study confirms the existence of the mid-cap premium and finds that exposures to the size and profitability factors may explain this premium. The mid-cap premium may help investors improve portfolio performance without adding significant extra risk, yet investors must fully understand the specific mid-cap index they intend to use to avoid causing distortions to their portfolios.TOPICS: Mutual fund performance, factor-based models, performance measurement %U https://jii.pm-research.com/content/iijindinv/8/4/22.full.pdf