Hedging demands drive high expected returns for small firms and value stocks
The article looks at how people choose which stocks to invest in based on factors like company size and book value. It shows that when investors can predict returns, they tend to avoid risky stocks early in life. This is because they want to protect themselves from potential losses. The study also found that small companies and those with high book values tend to have higher returns. Overall, investors are willing to pay more for information on book value than on company size.