Stocks of small firms have a higher annual average return than stocks in general.Some economists attribute this to

Question

Quizplus · Accepted Answer

The higher average return on the stocks of small firms can be attributed to a combination of factors such as compensation for higher risk, lower liquidity, and higher information costs. These factors make small firm stocks less attractive to investors, leading to a higher return as compensation for taking on the additional risk and costs. Therefore, all the options A, B, and C, contribute towards explaining the higher average return of stocks of small firms.

Stocks of Small Firms Have a Higher Annual Average Return