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What risk is likely to particularly explain the pattern of small firm effects? ...

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Finance

What risk is likely to particularly explain the pattern of small firm effects?

What is of the following is wrong for the CAPM?

A non-zero alpha reflects that the security is efficiently priced in the CAPM world.

CAPM makes sure that the following risk-reward ratio to be the same across stocks: E(R)/Cov(R,Rm), where R is the excess return of a stock and Rm is the excess return of the market.

Even if the risk of a stock is entirely due to firm specific risk, the stock is expected to earn the same return as a risk-free asset.

CAPM makes sure that the following risk-reward ratio to be the same across stocks: E(R)/Var(R), where R is the excess return of a stock.

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