Small cap stocks jumped 18.6 percent while large caps climbed 11.5 percent. The small cap Russell 2000 index also reached an all-time high at year's end.

Though both styles reflected a positive year for U.S. equities, the large cap Russell 1000 index remained about 15 percent below its all-time high.

"Investors expecting large cap stocks to take flight relative to small stocks in 2004 mostly sat on the runway," said Dennis Jensen, senior portfolio analyst at the Russell Investment Group.

"Large caps showed some strength mid-year, but small caps flexed their muscle again in the fourth quarter," he added.

Jensen added that the Russell 2000 has reflected a 9.4 percent annualized return since the start of 1999, while the Russell 1000 has posted a 1.8 percent annualized return.

Russell Investment Group manages more than $114 billion in assets and is a subsidiary of Northwestern Mutual.