Investors know that, in efficient markets, getting a high return means taking a high risk. Of course, some risks are higher than others. If investors can get a high return in one asset class and take another risk that's lower than expected relative to that return, then that asset class is probably worth considering for a portfolio.

Mid-cap stocks may be just such an asset class, according to a study by Charlottesville, Va.-based Chase Investment Counsel. Over a 10-, 20- and 30-year period ending last year, mid-caps (generally defined as issues with market capitalizations of $1 billion to $15 billion) have outperformed both large-caps and small-caps on an absolute basis.

As seen in the chart below of annualized total returns, comparing the Russell 1000 (large-cap) index with the Russell Midcap and Russell 2000 (small-cap) indexes, the mid-cap index had better returns over 10 years, 20 years and 30 years.

One question those considering the returns might pose is whether the result could be a distortion resulting from the chosen start and end points. But it doesn't seem so: mid-caps also had a strong record in shorter periods.

Looking at rolling 10-year calendar periods from 1979 to 1988 through 2002 to 2011, mid-caps consistently performed at least as well as the large-cap and small-cap indexes. Of the two dozen 10-year periods available, mid-caps were the best performer in 17 of these 10-year periods, while large-caps were the best performers in the remaining seven.

Another question is whether the strong performance of mid-caps is due to a higher risk profile. However, a look at some basic measures of risk - including standard deviation of returns, beta and downside capture relative to the Russell 3000 Index over 30 years ending Dec. 31, 2011 - shows mid-caps have a risk level between large-caps and small-caps.

As with small-caps, mid-caps can be a useful means to diversify from large-cap stocks. Also as with small-caps, fewer analysts follow mid-caps than large-caps, meaning there's a greater chance of a surprise - positive or negative - that could move a mid-cap stock price substantially. However, mid-cap companies tend to be a bit more stable and more proven than small-caps, and the stocks tend to have greater liquidity. On the whole, this sometimes overlooked asset class makes sense in a wide range of investor portfolios. FP

Brian J. Lazorishak is senior portfolio manager of the Chase Mid-Cap Growth Fund.