The Effect of Liquidity on Stock Returns Might Be Related

question 19

Multiple Choice

The effect of liquidity on stock returns might be related to:
I. The small-firm effect
II The book-to-market effect
III The neglected-firm effect
IV. The P/E effect

• A) I and II only
• B) I and III only
• C) II and IV only
• D) I, II, and III only

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Definitions:

Fixed Cost

A cost that does not change with an increase or decrease in the amount of goods or services produced.

Variable Cost

A cost that changes with the level of output or production.

Average Variable Cost

The total variable cost divided by the quantity of output produced, representing the variable cost per unit of output.

Marginal Costs

refers to the cost associated with producing each additional unit of a product or service.