Which of these does not describe the differential information hypothesis?

Question

Quizplus · Accepted Answer

The differential information hypothesis states that larger firms have more information available from sources other than accounting reports. Option A describes this hypothesis. Option B is incorrect because it states the larger the firm, the more information is contained in profits, but the hypothesis states that larger firms have more information available from sources other than accounting reports. Option C correctly describes the development of the theory from transaction costs and different incentives for information search. Option D is incorrect because the hypothesis states that the incentive to undertake research for mispricing is greater for smaller firms, given the costs of information search are fixed and constant across firms.

Which of These Does Not Describe the Differential Information Hypothesis