In Theory, the CAPM Requires That the Market Portfolio Consist

question 63

True/False

In theory, the CAPM requires that the market portfolio consist of only common stocks.

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Definitions:

Decreasing-cost Industry

An industry in which costs per unit decrease as the scale of operation increases, often due to economies of scale.

Downsloping

A characteristic of certain economic graphs, such as the demand curve, indicating that as price decreases, quantity demanded increases.

Purely Competitive Firm

A business that operates in a market where there are many buyers and sellers, and it has no control over the market price of its product.

Economic Profit

The difference between a firm’s total revenue and its opportunity costs (including both explicit and implicit).