FIN 351 TEXT QUIZ CHAPTER 10

71 The Small Firm Effect is the theory that
A Firms with small market capitalization outperform the market
B. Small firms have greater market capitalization
C. Transaction costs associated with dealing in larger capitalization firms might severely cut into profit
potential
D. More than one of the above
72. Which of the following is NOT a reason for the failure of investment in small firms to catch on as an
important strategy?
A. There is a lack of institutional investors
B. Information on these smaller firms increases the efficiency of the market
C. Some investors are not properly positioned for the segmented market
D. All of the above are reasons
7
73. Banz's research on the small firm effect was criticized because
A. The stocks were too small
B. It was highly influenced by a depression and a major war
C. The stocks were too large
D. It was highly influenced by inflation and a devaluation of the dollar
74. Prominent research on the small firm effect has been done by
A. Fama and Roll
B. Fama and French
C. French and Roll
D. Banz and Reinganum
75. When companies are purchased through a leveraged buyout
A. The income statement of the company serves as the collateral base
B. The debt burden is typically very large
C. Stock is often sold to help raise additional cash
D. None of the above