If an analyst were analyzing a small company,a small stock equity risk premium would be more appropriate than using a large-stock equity risk premium.

Question

Quizplus · Accepted Answer

This is because small companies typically have higher risk than larger companies, and therefore would require a higher equity risk premium. Using a large stock equity risk premium may underestimate the risk of investing in a small company.

If an Analyst Were Analyzing a Small Company,a Small Stock