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

Multiple Choice

Studies of the small-firm effect indicate that 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 fewer 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.