There Is No Small Cap Premium

One of the misunderstood points of financial markets is that Affect A is very often the outgrowth of Effect B. A good example is volatility. Commentators often discuss volatility as if it's an entity above and apart from the market, but that's not really the case. In reality, movements in the VIX are strongly correlated to what the market recently did. I once found a 70% correlation between the VIX and the distance the S&P 500 is from its six-month high. Markets don't rise because volatility is low. Instead, volatility falls because the market is up.