Small Minus Big (SMB)

Small Minus Big (SMB) is a financial concept used to compare the performance of smaller companies versus larger ones. It’s part of a method to analyze investment risk and return, where “small” companies typically have lower market capitalization and “big” companies have higher. The SMB factor measures how smaller stocks tend to outperform larger stocks over time, reflecting the premium investors might earn for taking on additional risk associated with smaller firms. In simple terms, SMB helps investors understand whether investing in smaller companies could potentially yield higher returns compared to bigger, more established firms.