Studies show that it is generally unnecessary to adjust the capital asset pricing model for the size of the firm .

Question

Quizplus · Accepted Answer

Studies and financial theories suggest that smaller firms often have higher expected returns to compensate for their higher risk, which is not directly accounted for in the traditional Capital Asset Pricing Model (CAPM). This has led to adjustments and alternative models that consider size and other factors.

Studies Show That It Is Generally Unnecessary to Adjust the Capital