How would you use the Consumption-CAPM to explain the small-firm effect? (i.e. firms with small market...

How would you use the Consumption-CAPM to explain the small-firm effect? (i.e. firms with small market capitalisation have higher returns)

Solutions

Expert Solution

How would you use the Consumption-CAPM to explain the small-firm effect? (i.e. firms with small market capitalisation have higher returns)

Answer: publicly traded companies can be divided into three categories

1- Large cap

2- Mid cap

3- small cap

Small firm have high potential to growth more than the large one. As they have small amount of fund any problem can be corrected efficiently. Because of the size of the firm their funding problem can be corrected quickly. Small firm have high opportunity to grow and also have more opportunity to give high return than the large firm. Small firm appreciation rate is higher as compare to lagre firm. At the same time small firm stock outsourcing is higher than that of large firm. fame and French released factors model released in 1992. In their model they explained that small firm have high opportunity to grow than the large firm.

Hope answered your question thank you.

Rahul Sunny answered 2 months ago

Next > < Previous

Related Solutions

HOW WOULD YOU BUILD A BUDGET FOR: A.) FOR A FOR PROFIT FIRM, I.E. SAY A...

HOW WOULD YOU BUILD A BUDGET FOR: A.) FOR A FOR PROFIT FIRM, I.E. SAY A RESTAURANT B.) A NON-PROFIT, SAY A NON-PROFIT CHARITY TO HELP STUDENTS IN DISADVANTAGED AREAS WITH AFTER SCHOOL PROGRAMS WHAT WOULD YOU DO, HOW WOULD YOU SET IT UP? PLEASE GIVE DETAILS AND THEN PUT IN AN EXCEL SHEET AS WELL

1. Explain how you would use the Security Market Line (SML) to discern the breadth of...

1. Explain how you would use the Security Market Line (SML) to discern the breadth of a portfolio’s individual stock winners vs. losers. 2. Explain how the link between price (P) and intrinsic value (V) are viewed by proponents of the Efficient Market Hypothesis and by those who are not proponents.

When (i.e., in what business environment) would it be better to make use of small batch...

When (i.e., in what business environment) would it be better to make use of small batch manufacturing rather than mass production? Give an Example.

How can you use CAPM to construct a portfolio of stocks?

Explain how you estimate the risk-free rate, market risk premium (in CAPM), and dividend growth rates...

Explain how you estimate the risk-free rate, market risk premium (in CAPM), and dividend growth rates (in stock valuation model).

Statistical significance is found in a study, but the effect in reality is very small (i.e.,...

Statistical significance is found in a study, but the effect in reality is very small (i.e., there was a very minor difference in attitude between men and women). Were the results meaningful? An independent samples t test was conducted to determine whether differences exist between men and women on cultural competency scores. The samples consisted of 663 women and 650 men taken from a convenience sample of public, private, and non-profit organizations. Each participant was administered an instrument that measured...

How would you characterize an effect size of d = .27? Negligible Small Medium Large What...

How would you characterize an effect size of d = .27? Negligible Small Medium Large What level of measurement is the ranking of baseball teams in the ASUN conference? Nominal Ordinal Interval Ratio What are the three measures of central tendency? List the three measures of central tendency and provide an example of the type of data or distribution in which it is best to use each. What are the two types of errors that can be made in statistical...

Use a graph to demonstrate the circumstances that would prevail in a competitive market where firms...

Use a graph to demonstrate the circumstances that would prevail in a competitive market where firms are earning economic profits. Can this scenario be maintained in the long run? Graphically depict the deadweight loss caused by a monopoly. Graph must be labeled appropriately to receive full credit.

Use a graph to demonstrate the circumstances that would prevail in a competitive market where firms...

Use a graph to demonstrate the circumstances that would prevail in a competitive market where firms are earning economic profits. Can this scenario be maintained in the long run? Explain your answer.

If you were the owner of an Accounting Firm, how you would use budgets in your...

If you were the owner of an Accounting Firm, how you would use budgets in your company and how you would use budgets to hold each manager accountable?

Subjects