Which of the following about the size and value strategies are correct? 1. Size and value effects are against market efficiency in the CAPM world, 2. Size effect is not against market efficiency in the CAPM world because small firms have higher market beta than large firms. 3. The size effect is against market efficiency in the CAPM world because small firms' market betas are only slightly higher than large firms' but their returns are much higher than large firms. 4 The value effect is against market efficiency in the CAPM world because growth and value stocks have similar market betas. 5 Value stocks have much higher market beta than growth stocks. So the value effect is not against market efficiency in the CAPM world, 2 and 5 1 and 4 1, 3, and 4 1 and 3 QUESTION 54 1. If one accepts the FF3 model, value investing requires someone to purchase some deeply discounted assets at some "systematically" bad times (like recessions) and wait until the asset prices recover later. The reason for the strategy to make money could be because the investors of the strategy provides risk bearing service to the society. 2. For market efficiency believers, if a strategy like the value strategy can on average make money in the long term, it must be because the investors using the strategy are providing some benefits consciously or unconsciously to others in the market. 3. If the market is efficient, Investors can make money from value investing if they find some value stocks that all investors already believe the stocks will have good growth in earnings in the future. 4. Growth stocks are stocks with good growth potential. So it should have higher returns going forward. 1 and 2 2 and 3 O. 1, 2, and 3 O 1.3, and 4