Do size and value effects mean that small outperform

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International Financial Management
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Chapter 9 / Exercise 28
International Financial Management
Madura
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9. Do size and value effects mean that small outperform large or value outperform growth in every year/every month? What should be the correct horizon to invest in the size and the value effects? (2) 10. Google is a big stock and LinkedIN is a small stock, but at the same time Google has a higher book-to-market ratio than LindedIN. According to the size effect, Google should have lower return than LinkedIN because its size is bigger; but according to the value effect, Google should have higher return than LinkedIN because its book to market ratio is higher. Is the above statement correct? Why? (2)
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International Financial Management
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Chapter 9 / Exercise 28
International Financial Management
Madura
Expert Verified
11. Which of the following outcome(s) are most likely to be inconsistent with the efficient market hypothesis in a Fama-French three-factor world? Why? (2)
12. What are the rational and irrational reasons you think that may lead to high returns in small and value stocks? For rational reasons, think along the line of why these reasons matter in your real life rather than just being psychological. (8) Requirements: 1. Double space with font size 11 or 12 2. Each person can either turn in your individual write-up or form a group of no more than 4 people to discuss the case. If your group agrees on the answer to every question, you can turn in one single write-up with every group member’s name on it. Otherwise, you can still choose to prepare your own individual write-up. 3. Due in the beginning the case session. Please do not submit your write-up through Blackboard.Instead, hand in them directly at the beginning of the case session. 4. Be prepared to present/discuss your answers in class. 5. The website link to obtain the case is the following:

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