Size of firm and market or book ratio are variables which are related to

The correct answer is: D. stock returns.

Size of firm and market or book ratio are variables which are related to stock returns.

• Size of firm is a measure of the market capitalization of a company. It is calculated by multiplying the number of shares outstanding by the current market price per share.
• Market or book ratio is a measure of the value of a company’s assets relative to its market capitalization. It is calculated by dividing the market capitalization by the book value of equity.

Both size of firm and market or book ratio are used as predictors of stock returns. Studies have shown that small-cap stocks and stocks with high market or book ratios tend to have higher returns than large-cap stocks and stocks with low market or book ratios.

• Premium returns are returns that are in excess of the expected returns. They are often referred to as abnormal returns or excess returns.
• Unquoted returns are returns that are not reported on a public exchange. They are often referred to as private returns or illiquid returns.
• Quoted returns are returns that are reported on a public exchange. They are often referred to as public returns or liquid returns.