Which of the Following Statements Is FALSE

question 61

Multiple Choice

Which of the following statements is FALSE?

• A)A momentum strategy is one where you buy stocks that have had low past returns and (short)sell stocks that have had high past returns.
• B)Over the years since the discovery of the CAPM,it has become increasingly clear to researchers and practitioners alike that when forming portfolios based on market capitalization,book-to-market ratios,and past returns,one can construct trading strategies that have a positive alpha.
• C)In one study,portfolios containing firms with the highest realized returns over the previous 6-12 months had positive alphas over the next 3-12 months.
• D)If the market portfolio is not efficient,then a portfolio of small stocks will likely have positive alphas.

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Definitions:

Historical Cost Principle

An accounting principle that states assets should be recorded and reported at their original purchase cost.

Cash-Equivalent Value

The value of an asset that is easily convertible into a known amount of cash with minimal risk of change in value.

Business Activities

Operations, actions, and tasks that a company engages in as part of its economic operations, including production, sales, marketing, and finance.

Resources

Assets, materials, and inputs used by an organization to produce goods or services.