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NEW QUESTION: 1
George Judas, CFA, manages a small capitalization mutual fund. Judas only invests in companies with low price to earnings ratios. Judas states that research suggests that returns on both small capitalization and low P/E companies are anomalous, in that they will provide investors with superior risk-adjusted long-term returns. Judas' supervisor counters with the following two observations.
Observation 1:The research does not adequately account for the level of risk of small capitalization and low price to earnings ratio companies.
Observation 2:The research on small capitalization and low price to earnings ratio companies suffers from a small sample bias.
Are the supervisor's observations most likely correct?
A. Only Observation 2 is correct.
B. Only Observation 1 is correct.