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For example, pretend that some S&P 600 corporation succeeds and profits, like some biotech discovers multiple cures to disease like cancer. Assume that its market capitalization then skyrockets enough that it becomes a large cap and joins the S&P 400 or S&P 500.

  1. Wouldn't it join either of the larger S&P indices? Are there reasons that it'd choose to remain S&P 600?

  2. If so, then this former small cap has become a large cap. So how can small caps historically outperform large caps after recessions?

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  • $\begingroup$ There is no choice here. The indices are decided by FTSE Russell based on market capitalization $\endgroup$ – Henry Aug 12 '20 at 8:45
  • $\begingroup$ @Henry Thanks. I've changed Russell to S&P now. $\endgroup$ – NNOX Apps Aug 12 '20 at 19:42
  • $\begingroup$ What is the logic behind (2)? Empirical effects in equities - to the extent they exist - are presumably related to how a group of companies acts, and not the fate of one firm. Most large caps were previously smaller companies, and membership changes are an ongoing process. $\endgroup$ – Brian Romanchuk Aug 12 '20 at 23:02

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