Stock market favors big, safe companies in good times, risky ones in bad.
The stock market is more predictable in bad times than in good times. When things are going poorly, smaller, cheaper, and more cyclical stocks are riskier and have higher returns. But when things are good, bigger, more expensive, and less cyclical stocks perform better even though they're not riskier. Economic models show that returns match risk only in bad times. These findings hold up across different ways of measuring risk and different types of assets tested.