Which of the Following Best Describes the So-Called Size Effect

question 37

Multiple Choice

Which of the following best describes the so-called size effect?

• A) On average, small cap stocks return more than large cap stocks.
• B) On average, large cap stocks return more than small cap stocks.
• C) On average, small cap stocks earn abnormal returns.
• D) Small cap stocks tend to perform exceptionally well during bull markets.

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Definitions:

Long-run Equilibrium

A state in which all firms in a market are making zero economic profit, leading to an optimal allocation of resources.

Competitive Price-searcher

A market participant who sets prices through active search and strategy, often in markets with some degree of product differentiation.

Product Diversity

The variation of products and services offered in a market to meet different customer needs and preferences.