Small cap stock out-performance explains at some or all of the equal-weighted SP500 out performing the cap-weighted version. The attached is the ratio of two tradeable ETF's: IWM (Russell 2000 stocks) and SPY (SP500 cap weighted), from May 2000 to present.

On a weekly-return basis, though IWM was was more than 2X higher than SPY they were not significantly different:

Two-Sample T-Test and CI: IWM week, SPY week

Two-sample T for IWM week vs SPY week

         N    Mean   StDev  SE Mean
IWM week  601  0.0016  0.0341   0.0014 T=0.6

SPY week  601  0.0006  0.0271   0.0011 

Though as expected IWM did have significantly higher volatility:

Test for Equal Variances: IWM week, SPY week

95% Bonferroni confidence intervals for standard deviations

      N      Lower      StDev      Upper

IWM week  601  0.0320  0.0341  0.0364
SPY week  601  0.0254  0.0271  0.0289

F-Test (normal distribution)
Test statistic = 1.58, p-value = 0.000

Levene's Test (any continuous distribution)
Test statistic = 24.34, p-value = 0.000


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