Studies of Firms Classified on the Basis of P/E Ratios

Multiple Choice

Studies of firms classified on the basis of P/E ratios come to the conclusion that low-P/E-ratio stocks earn much higher returns,after adjusting for risk,than high-P/E-ratio stocks.This is because

A) low-P/E-ratio stocks are riskier than high-P/E-ratio stocks.
B) investors like low-P/E-ratio stocks.
C) low-P/E-ratio stocks are more likely to be undervalued.