In that respect, mid-cap shares are considered an attractive investment avenue because their growth rate will be comparably higher. Midcap companies are generally in the growth momentum in their life cycles.
Thus, they may or may not pay a dividend, often deciding to continue to reinvest in growing future operations and earning ability. For investors looking for stock price appreciation, mid cap companies provide a fertile hunting ground.
However on the flip side, mid-cap shares are of small companies where revenue and profits could be more volatile than larger companies.
In a pioneering move, MBSL constructed a Stock market Index: the “MBSL Midcap Index”, which measures the aggregate price level and price movements of medium size companies listed on the Colombo Stock Exchange (CSE).
There was no index to measure the price movement of medium sized companies listed on the CSE and hence the “MBSL Midcap Index” filled this vacuum.
The index which came into operation in the Year 1999 is revised annually and looks at the Middle Range Market Capitalization, Liquidity and the Profitability of the firms to be included in the Midcap Index.
MBSL Midcap Index can be used as the benchmark index by individuals and institutional investors who prefer growth but are prepared to with stand only conservative levels of volatility in their equity investments.
Mid-caps generally outperform because they are in the prime of growth and have better investor focus due to lower capitalization seeing both cash flow and earnings per share accelerate, especially compared to large-caps.and Mid-cap companies generally have much greater growth potential than comparable large-caps, with more seasoned management, liquidity, and operating histories than small-caps.
Therefore including mid-caps in an overall portfolio allocation is a proven diversifier for increasing returns while enjoying a very favorable risk/reward ratio.
http://www.dailynews.lk/2012/08/10/bus17.asp