Small-value funds own__________:
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A. B. C. D.A
"Small-value funds" are mutual funds or exchange-traded funds (ETFs) that invest in stocks of small-cap companies with relatively low valuations compared to their fundamentals such as earnings, book value, or cash flow.
Answer A, "Small company stock considered undervalued," is the most accurate description of what small-value funds own. These funds seek to invest in companies that are undervalued by the market, meaning that their stock prices do not reflect the true value of the company's assets and earnings potential. Small-value funds typically invest in stocks of companies that have a market capitalization below a certain threshold, such as $2 billion or $3 billion.
Answer B, "Stocks of small value," is a bit less precise but still generally accurate. Small-value funds do invest in stocks of small-cap companies, but it is not simply the small size of the company that makes it attractive to these funds. The "value" aspect refers to the fact that the company's stock is believed to be undervalued by the market.
Answer C, "Small amounts of value companies," is not an accurate description of what small-value funds invest in. These funds typically invest in a diversified portfolio of small-cap stocks that are believed to be undervalued by the market, not small amounts of larger value companies.
Answer D, "Small company stocks considered overvalued," is the opposite of what small-value funds seek to invest in. These funds look for small-cap companies that are considered undervalued, not overvalued. Therefore, answer D is incorrect.
In summary, small-value funds own small company stocks that are considered undervalued by the market.