Which One of the Following Combinations Will Tend to Produce

question 106

Multiple Choice

Which one of the following combinations will tend to produce the highest rate of return according to the Fama-French three-factor model? Assume beta is constant in all cases

• A) large market capitalization and high book-to-market ratio
• B) B. large market capitalization and low book-to-market ratio
• C) C. small market capitalization and high book-to-market ratio
• D) D. small market capitalization and a book-to-market ratio of 1.0
• E) E. small market capitalization and a low book-to-market ratio

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Definitions:

Unconscious Determination

The influence of unconscious factors on thoughts, behaviors, and decisions, highlighting the role of hidden mental processes.

Behavior Consequence

The outcome or result of an action, which can either reinforce the behavior or deter it in the future.

Reinforcement

A psychological principle involving the use of rewards or punishments to increase or decrease the likelihood of a particular behavior.

Aversive Event

An unpleasant or undesirable occurrence that can lead to changes in behavior or psychological state.