Comment by mixedbit

Could outperformance of largest cap companies be partially explained by dividends paid by smaller caps? Reasoning behind this:

* Index investing raises in popularity, with index funds that automatically reinvest dividends being often preferred due to their tax efficiency.

* Large caps prefer to repurchase stocks, stock repurchases contribute fully towards a given company share price increase.

* Smaller caps still pay dividends, these dividends are then reinvested by index funds and the reinvestment is weighted by capitalization, so large caps share price benefits more from repurchases done with dividend cash paid by smaller caps. When dividend is paid, share price of a company that paid it is reduced, which further widens the performance gap between large and smaller caps.