Which of the Below Statements Is FALSE

question 9

Multiple Choice

Which of the below statements is FALSE?

• A) For strategies applied to stock index futures, a short sale of the stocks in the index means that all stocks in the index must be sold at different times.
• B) When illustrating arbitrage strategies, one assumes that (1) only one asset is deliverable, and (2) the settlement date occurs at a known, fixed point in the future.
• C) Some futures contracts involve a single asset, but other contracts apply to a basket of assets or an index.
• D) The basic arbitrage model presented in this chapter ignores not only taxes but also different tax treatment of cash market transactions and futures transactions.

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Definitions:

Anchoring

The tendency people have to unconsciously base, or “anchor,” the valuation of an item they are currently thinking about on recently considered but logically irrelevant information.

Irrelevant Information

Information that has no bearing on the decisions being made, providing no value to the decision-making process.

Anchoring

A cognitive bias that describes the human tendency to rely too heavily on the first piece of information offered when making decisions.

Time Inconsistency

The human tendency to systematically misjudge at the present time what will actually end up being desired at a future time.