Question

Smaller company stocks (by market cap) are less risky than large company stocks because they are traded less and are therefore less subject to general market volatility True

False

Answer 1

The statement is False.

Smaller company stocks are traded less because of lower liquidity of stock in the market. lower liquidity is caused by fewer sellers and buyers of Smaller company stocks.

the reason for fewer sellers and buyers of Smaller company stocks is that these companies are not mature, have volatile profitability and proven business models.

market volatility is caused by changes in interest rate, inflation rate etc. so, all companies whether large or smaller are affected by market volatility.

answered by: anonymous