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:

Synergistic Fashion

A manner of working together in which the combined effect is greater than the sum of individual efforts.

Group Brainstorming

A collective thinking process in which group members generate ideas or solutions to a problem in a non-judgmental environment.

Solitary Brainstorming

is a process where an individual generates ideas or solutions on their own without the influence or interruption of a group setting.

Group Brainstorming

is a creative technique where individuals come together to generate ideas or solve problems collectively, leveraging the power of diverse perspectives.