Definition of small cap

shorthand for small capitalization stocks or mutual funds holding such stocks. Small cap stocks usually have a market capitalization (number of shares outstanding multiplied by the stock price) of $500 million or less. Those under $50 million in market cap are known as microcap issues. Small capitalization stocks represent companies that are less well established, but in many cases faster-growing than mid-cap stocks (from $500 million to $3 billion-$5 billion) or large cap stocks ($1 billion or more). (Ranges vary somewhat and may overlap, depending on the funds or indexer defining them.) Since they are less established, small cap stocks are usually more volatile than blue chips.