Which of the Following Statements Is FALSE

question 41

Multiple Choice

Which of the following statements is FALSE?

• A)To improve the performance of their portfolios,investors who are holding the market portfolio will compare the expected return of each security with its required return from the security market line.
• B)The Sharpe ratio of a portfolio will increase if we sell stocks with positive alphas.
• C)When a stock's alpha is not zero,investors can improve upon the performance of the market portfolio.
• D)When the market portfolio is efficient,all stocks are on the security market line and have an alpha of zero.

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Definitions:

Legitimate

Conforming to established laws, rules, or standards, often carrying the implication of being justified or official.

Coercive

Relating to or using force or threats to persuade someone to do something or to achieve compliance.

Process

A sequence of measures or procedures executed to accomplish a specific goal.

Information

Data that is accurate and timely, specific and organized for a purpose, presented within a context that gives it meaning and relevance.