Stocks of Small Firms Have a Higher Annual Average Return

question 54

Multiple Choice

Stocks of small firms have a higher annual average return than stocks in general.Some economists attribute this to

• A) compensation for the higher risk of small firms.
• B) lower liquidity of stocks of small firms.
• C) higher information costs of stocks of small firms.
• D) all of the above.

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Definitions:

SST

A measure of the total variation in a dataset that is the sum of squares total, often used in the context of regression analysis.

SSE

The overall sum of errors squared, highlighting the divergence between a model's predictions and real-world data observations.

Least Squares Estimate

A method in statistics for estimating the best-fitting line to a set of points by minimizing the sum of the squares of the differences between the observed values and the values provided by the model.

Slope

This term describes the rate at which a line ascends or descends, calculated as the change in the y-axis divided by the change in the x-axis for any two points on the line.