Hi guys encountered this topic review with PM : decreasing or increasing marginal utility small-company stocks fluctuate more than largecompany stocks - easy and it is obvious For a given level of wealth, the large-company stock would have a risk premium based on decreasing marginal utility of wealth for the investor. price of the stock is high already so investor has less incentive to repla ce current consumption with future one and this one? Why is lower for small stocks? Am I missing sth here please help. The small-company stock would lead to bigger increases and decreases in wealth relative to the investor’s initial wealth. Thus, the average expected utility of the investor is lower for the smaller stock, so that smaller stocks require a bigger risk premium.