Which of the Following Statements Is FALSE

question 34

Multiple Choice

Which of the following statements is FALSE?

• A)Nonzero alphas may merely indicate that the wrong market proxy is being used;they do not necessarily indicate forgone positive NPV investment opportunities.
• B)The true market portfolio contains much more than just stocks,it includes bonds,real estate,art,precious metals,and any other investment vehicles available.
• C)If the true market portfolio is efficient,but the proxy portfolio is not highly correlated with the true market portfolio,then the true market portfolio will not be efficient and stocks will have nonzero alphas.
• D)Much of the investment wealth cannot be included in the proxy for the market portfolio since it does not trade in competitive markets.

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Definitions:

Demand (D)

In economic terms, the quantity of a good or service that consumers are willing and able to purchase at various prices during a given period.

Substitute

A good or service that can be used in place of another, allowing consumers to switch between them based on price, preference, or availability.

Equilibrium

A situation where the supply and demand in the market are equal, leading to stable prices.

Margarine

A spread used as a substitute for butter, made from vegetable oils or animal fats.