Though small-cap stocks as an asset class have long lost their academic seal of approval, they may nevertheless be good bets for the next several years.

This so-called small-cap effect — where the average small-cap stock outperform the market — comes from a doctoral dissertation by Rolf Banz at the University of Chicago in the late 1970s . Looking at stock performance between 1936 and 1975, Banz found that “the common stock of small firms had, on average, higher risk-adjusted returns than the common stock of large firms.”

This pattern that Banz documented has not held up out of sample, however. Over the four decades since Banz’s research was published, small-cap stocks have significantly lagged the market, on average. Moreover, according to recent research , the small-cap effect did not exist over the decades prior to the sample on which Banz focused — as far back as 1866, in fact.

Many financial professionals have concluded from this and other research that there’s no reason to favor smaller stocks over larger ones. A particular small-cap stock might be attractive, but not the asset class itself.

Yet that conclusion is premature, according to Guido Baltussen of Erasmus University in the Netherlands. Baltussen is a co-author of a recent study which found that the size effect has not existed over the entire period back to 1866. In an email, Baltussen said that, despite the small-cap effect’s insignificance going back to 1866, the past 158 years have contained lengthy periods in which smaller stocks did outperform larger ones.

Furthermore, these periods of outperformance are “to some extent predictable.” One of these periods seems to be starting now. A recent study from Northern Trust Asset Management, co-authored by Baltussen, portfolio manager Abhishek Gupta, and researcher Daniel Fang, identifies three parallels between current market conditions and those that in the past have been followed by small-cap outperformance for between “3 to 10 years.”

These three factors are: