Their report, the RBS Hoare Govett Smaller Companies (HGSC) Index, published in conjunction with Royal Bank of Scotland, measures how firms in the bottom 10% by value are performing in the main UK equity market.
The index, launched in 1987, gave a total return of 26.4% last year which was 11.9% higher than the FTSE All-Share.
In a joint statement, Dimson and Marsh, Emeritus Professors of Finance, said: "Between their March 2009 lows and end-2010, the FTSE All-Share returned 83.3%, the HGSC index 111.6%, and the HG1000 minnows index 117.6%.
"An investment in 1955 of £1,000 in the HGSC, with dividends reinvested, would today be worth £3.25 million, as compared to £0.62 million with the FTSE All-Share. Small and mid-sized companies have had excellent performance over the short term and the long term."
The report finds that, during 2010, smaller companies beat larger ones in 21 of the 26 worldwide markets in the study. In 2000-10, smaller companies beat larger ones in 24 of the 26 markets, with an average small-cap premium (the excess of smaller over larger-company stock returns) of 7.5% per year.
Over the long haul, value stocks and the smallest companies have beaten other constituents of the HGSC, the authors noted.