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The Small-Minus-Big portfolio, SMB, consists of a long position in
the market’s 50 % smallest firms by market cap (small) and a short position in the market’s 50 % largest firms (big). Based on the past 20 years of monthly returns, an analyst finds that stock X has a SMB factor loading (beta) of 0.5. Which statement below is correct?
Select one:
A. We cannot conclude whether stock X is larger than an average stock in terms of size.
B. Stock X is larger than an average stock in terms of size.
C. Stock X is smaller than an average stock in terms of size.
D. Stock X is similar to an average stock in terms of size.
 
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