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US small-cap rally sends valuations soaring

Price-earnings ratios of shares in the Russell 2000 Index are three times as high as for those in the S&P 500 Index, reports LU WANG

[NEW YORK] IN ONE corner of the US equity market, investor enthusiasm is exceeding the frenzy of the Internet bubble. Small-cap shares tracked by the Russell 2000 Index have rallied for seven straight quarters, the longest stretch ever, sending valuations 26 per cent above levels at the height of the 1990s rally. Gains in stocks from LogMeIn Inc to Athenahealth Inc have pushed the gauge up 248 per cent since the bull market began five years ago, leaving price-earnings ratios about three times as high as for shares in the Standard & Poor's 500 Index.

Surging small-caps were cited by Federal Reserve governor Daniel Tarullo last month as one reason policy makers should ensure they're not creating...

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