Date of Award


Document Type

Honors Thesis

Degree Name

Bachelor of Arts



Advisor/Committee Chair

David Smith


Do mutual fund managers outperform through a bias toward smaller-cap stocks than represented by the benchmark index? This study attempts to explain mutual fund outperformance through testing the average market cap (AMC) of mutual funds relative to their respective benchmark indexes. If outperforming funds show a bias toward smaller average holdings, then outperformance may be attributed to the value premium associated with small-cap stocks. Using Morningstar Direct, excess returns and average market cap of Holdings were collected on a quarterly basis for 1542 actively managed funds citing the S&P 500, S&P MidCap 400 and Russell 2000 as their primary benchmark. Fund managers were expected to have smaller average holdings than represented in the benchmark index. The results of the correlation analysis were significant and consistent with this hypothesis for all three indexes.