CFAI Vol 4 Reading 44 Q #2

can someone explain when the company specifies that this is a small company why you would add a small stock risk premium as well as a mid-cap risk premium in the build up?

Don’t have the books, but is it maybe a liquidity premium for the small size?

cookthebooks Wrote: ------------------------------------------------------- > can someone explain when the company specifies > that this is a small company why you would add a > small stock risk premium as well as a mid-cap risk > premium in the build up? Small stocks are generally more volatile and risky than large cap stocks. Hence the addition of a premium.