Google is a big stock and LinkedIN is a small stock, but at the same time Google has a higher book-to-market ratio than LindedIN. According to the size effect, Google should have lower return than LinkedIN because its size is bigger; but according to the value effect, Google should have higher return than LinkedIN because its book to market ratio is higher. Is the above statement correct? Why?

A. Incorrect. Size and value effects is a portfolio-based strategy not a individual stock-based strategy. The effects mainly hold at the portfolio level where individual stock noises are diversified away.

B. Correct. So size and value effects may not work well for individual stocks that have conflicting signals based on size and book-to-market ratios.

Which of the following outcome(s) are most likely to be inconsistent with the efficient market hypothesis in a Fama-French three-factor world?

		Higher market beta stocks have higher returns.
		All stocks have the same return on average.
		Even though DFA recently offered small and value portfolios, which focus on earning the high returns in small and value stocks, investors do not feel such stock portfolios offer more attractive investment opportunities in terms of risk-return tradeoff than other stock portfolios.
		Small and value stocks on average have higher returns than large and growth stocks, respectively.