Smaller companies hit hardest during emerging market crises

6-21-11

CORVALLIS, Ore. – A study of the reaction by the United States stock market to international financial crises shows that small companies are often hit hardest, and the impact is above and beyond what would be expected given their exposure to global market factors.

This unexpected result suggests the significant impact that investors’ actions can have during emerging market crises. During these crises, investors flee to the perceived safety of big companies and shed stocks of smaller companies, despite comparable levels of international exposure during normal periods.