The value effect suggests that investors can earn abnormal returns by holding stocks with:
A) low price multiples.
B) high price multiples.
C) small size and strong recent performance.
D) large size and strong recent performance.

Question

Quizplus · Accepted Answer

The value effect refers to the tendency for stocks with low price multiples, such as low price-to-earnings or price-to-book ratios, to outperform those with high price multiples.

The Value Effect Suggests That Investors Can Earn Abnormal Returns