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

question 28

Multiple Choice

Studies of the small-firm effect indicate 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 less 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

---

Definitions:

Bowman's Capsule

A part of the nephron in the kidney that encloses the glomerulus and where filtration of blood plasma begins in the process of urine formation.

Glomerulus

Cluster of leaky capillaries enclosed by a Bowman’s capsule.

Distal Tubule

Region of a kidney tubule that connects to a collecting tubule.

Proximal Tubule

Region of kidney tubule nearest Bowman’s capsule.