The small-firm effect refers to the observed tendency for stock prices to behave in a manner that is contrary to normal expectations. Describe this effect and discuss whether it represents sufficient information to conclude that the stock market does not operate efficiently. In formulating your response, consider: (a) what it means for the stock market to be inefficient, and (b) what role the measurement of risk plays in your conclusions about each effect.
Answer to relevant QuestionsSome studies related to the efficient market hypothesis generated results that implied additional factors beyond beta should be considered to estimate expected returns. What are these other variables and why should they be ...Consider the following questions related to empirical tests of the APT:a. Briefly discuss one study that does not support the APT. Briefly discuss a study that does support the APT. Which position seems more plausible?b. ...a. Compute the average monthly return and monthly standard return deviation for each portfolio and all three risk factors. Also state these values on an annualized basis.b. Based on the return and standard deviation ...When examining a firm's financial structure, would you be concerned with the firm's business risk? Why or why not?The Shamrock Vegetable Company has the following results.Net sales ............ $6,000,000Net total assets .......... 4,000,000Depreciation ........... 160,000Net income ............ 400,000Long-term debt ...
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