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The small-firm effect refers to the observed tendency for stock prices to behave in a manner that is contrary to normal expectations. Describe this effect
The small-firm effect refers to the observed tendency for stock prices to behave in a manner that is contrary to normal expectations. Describe this effect and discuss whether it represents sufficient information to conclude that the stock market does not operate efficiently. In for formulating your response, consider: (a) what it means for the stock market to be inefficient, and (b) what role the measurement of risk plays in your conclusions about each effect.
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