Assume That You Are Embarking on a Test of the Small-Firm

question 15

Multiple Choice

Assume that you are embarking on a test of the small-firm effect using APT. You form 10 size-based portfolios. The following finding would suggest there is evidence supporting APT:

• A) the top five size-based portfolios should have excess returns that exceed the bottom five size-based portfolios.
• B) the bottom five size-based portfolios should have excess returns that exceed the top five size-based portfolios.
• C) the ten portfolios must have excess returns not significantly different from zero.
• D) the ten portfolios must have excess returns significantly different from zero.
• E) none of the above.

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Definitions:

Recalcitrant Debtors

Individuals or entities that stubbornly refuse to pay debts they owe, despite legal obligations to do so.

Insider

An individual who possesses confidential information about a company, typically due to their position within the company.

Bankruptcy Courts

Specialized federal courts tasked with handling bankruptcy cases and related legal proceedings.

Accountant

An accountant is a professional who performs accounting functions such as audits or financial statement analysis for individuals or businesses.