Studies of the Small-Firm Effect Indicate That There May Be

question 75

Multiple Choice

Studies of the small-firm effect indicate that there may be superior return potential in investing in smaller-capitalization firms, because:

• A)the high P/E ratios of many of these firms eventually lead to superior returns.
• B)smaller firms have fewer expenses, therefore, making more money for their investors.
• C)there is less efficiency in this segment of the market, due to minimal institutional participation.
• D)smaller firms are always growing, along with the returns that their investors receive.