History

Perritt Capital Management, Inc. has been investing in smaller companies since the firm's inception in 1987. The firm's small company investment strategy was built on the research of Rolf Banz, a University of Chicago doctoral student who discovered the first crack in the foundation of the efficient market theory, dubbed "the small firm effect." The effect is the tendency of common stocks of small companies to outperform the stocks of large companies at equivalent levels of risk.

In 1983 Dr. Gerald W. Perritt published the first issue of Investment Horizons, an investment advisory newsletter based on the analysis of small company stocks. Over time, readers wished to become investors, and in 1987 Dr. Perritt formed Perritt Capital Management, Inc. The goal was to provide investment management services to high net worth individuals and institutional investors, while remaining focused on the advantages of small company stock investing.

Since Perritt Capital Management, Inc. began investing in portfolios of smaller companies, the small cap segment of the market has undergone substantial changes. Today, small cap companies are defined as those with market capitalizations of under $2 billion. Due to market growth, just ten years ago this same category was defined by companies with a market capitalization of $200 million or less.

Perritt Capital Management, Inc. began as a small cap manager based on Banz’s small company stock return research. Since that time, we have been consistent in our investment approach, focusing on the bottom 20% of companies as ranked by market capitalization. Today, that number includes all companies with a market capitalization of under $750 million, and it is now how we define the micro-cap sector.