Researchers have found that over long periods of time
A)the difference between the returns on large company and small company stocks is due solely to the difference in their risks.
B)strong form market efficiency exists,without argument.
C)large company stocks tend to outperform small company stocks.
D)arbitrage has no effect on market efficiency.
E)value stocks may outperform growth stocks on a risk-adjusted basis but no firm conclusion can be drawn.

Question

Quizplus · Accepted Answer

The statement suggests that value stocks may outperform growth stocks on a risk-adjusted basis, but no firm conclusion can be drawn. This implies that the difference between the returns on different types of stocks may not be solely due to their risks and that the market may not be perfectly efficient. Option A is incorrect because it suggests that the difference in returns is solely due to risk, which is not supported by the statement. Option B is incorrect because it suggests that strong form efficiency exists without any argument or evidence, which is not mentioned in the statement. Option C is incorrect because it suggests that large company stocks tend to outperform small company stocks, which is not supported by the statement. Option D is incorrect because it suggests that arbitrage has no effect on market efficiency, which is not mentioned in the statement.

Researchers Have Found That Over Long Periods of Time