Various Trading Strategies Appear to Offer Non-Zero Alphas When We

question 36

Multiple Choice

Various trading strategies appear to offer non-zero alphas when we examine real world data.If indeed these alphas are positive,it could be explained by any of the following EXCEPT:

• A)Investors are systematically ignoring positive-NPV investment opportunities.
• B)The market portfolio is inefficient,but the market portfolio proxy used to calculate the alphas is efficient.
• C)A stock's beta with the market portfolio does not adequately measure a stock's systematic risk.
• D)The positive alpha trading strategies contain risk that investors are unwilling to bear but the CAPM does not capture.

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Definitions:

General Adaptation Syndrome

A model describing the body's response to stress in three stages: alarm, resistance, and exhaustion.

Resistance Stage

The second phase of the general adaptation syndrome, marking the body's prolonged effort to adapt to a stressor.

Endocrine Glands

Glands of the endocrine system that release hormones directly into the bloodstream, influencing various bodily functions and processes.

Ducts

Tubes or passages in the body through which fluids pass.