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European equities have weakened considerably on the Greek debt default question, with the more risky small-cap stocks taking the brunt of the hit. However, if the eurozone shows any hint of recovery, European small-cap stocks and the exchange traded funds that follow the asset class may be an aggressive strategy to consider.

Mid- and small-cap stocks typically show more sensitivity to economic trends when compared to their large-cap counterparts, according to Zacks Investment Research. Consequently, small caps may be discounted during a positive uptrend and experience higher returns than the larger stocks.

Nevertheless, small caps are not for the weak of heart as they are highly illiquid and more risky. Instead of picking through individual stocks, investors may utilize an ETF approach to take on a broad, diversified exposure to European small-cap equities.

The iShares MSCI United Kingdom Small Cap (BATS:EWUS) follows the MSCI United Kingdom Small Cap Index, which is comprised of small-cap companies that represent the bottom 14% of the U.K. equity market. The fund has 269 holdings and the components are evenly spread out. EWUS has an expense ratio of 0.59%.

The iShares MSCI Germany Small Cap (BATS:EWGS) and Market Vectors Germany Small-Cap ETF (NYSEARCA:GERJ) provide exposure to German small caps. Both funds have similar coverage, expense structures, holdings and target markets. However, EWGS experiences average daily volumes four times that of GERJ. Additionally, the iShares ETF has an expense ratio of 0.59%, whereas the Market Vectors fund issues a 0.55% expense ratio.

The WisdomTree Europe SmallCap Dividend ETF (NYSEARCA:DFE) follows the WisdomTree Europe SmallCap Dividend Index and only holds components from the bottom 25% of the Index. DFE has 335 holdings, which are mostly evenly distributed with the top 10 accounting for 10.6% of the overall portfolio. The fund provides regular dividend payouts, with a yield of 5.02%, and potential long-term appreciation. DFE has an expense ratio of 0.58%.

Max Chen contributed to this article.

Source: Small-Cap ETFs For A Eurozone Recovery