All of the following are reasons that the historical outperformance of value stocks versus growth stocks may not be anomalous except:
- Abnormal returns represent compensation for risk exposures, such as the heightened risk of value stocks to suffer distress during downturns.
- Companies with strong historical growth rates are viewed as good investments, with higher expected returns than risk characteristics merit.
- The deviation disappears by incorporating a three-factor asset pricing model.
Why answer is B??
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