Which of the Following Statements Is FALSE

question 75

Multiple Choice

Which of the following statements is FALSE?

• A)Because expected returns are not easy to estimate,each portfolio that is added to a multifactor model increases the difficulty of implementing the model.
• B)The self-financing portfolio made from high minus low book-to-market stocks is called the high-minus-low (HML)portfolio.
• C)The Fama-French-Carhart (FFC)factor specification was identified a little more than ten years ago.Although it is widely used in academic literature to measure risk,much debate persists about whether it really is a significant improvement over the CAPM.
• D)A trading strategy that each year short sells portfolio S (small stocks)and uses this position to buy portfolio B (big stocks)has produced positive risk-adjusted returns historically.This self-financing portfolio is widely known as the small-minus-big (SMB)portfolio.

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Definitions:

Effective Annual Rate

The interest rate on an investment or loan over a year, taking into account the effect of compounding.

Data Mining

Examining large data sets for patterns.

Data Set

A set of data points.