Which of the Following Statements Is False

question 49

Multiple Choice

Which of the following statements is false?

• A) Beta differs from volatility.
• B) The risk premium investors can earn by holding the market portfolio is the difference between the market portfolio's expected return and the risk-free interest rate.
• C) Stocks in cyclical industries, in which revenues tend to vary greatly over the business cycle, are likely to be more sensitive to systematic risk and have higher betas than stocks in less sensitive industries.
• D) If we assume that the market portfolio (or the S&P 500) is efficient, then changes in the value of the market portfolio represent unsystematic shocks to the economy.

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Definitions:

Color Blind

A condition in which an individual has difficulty distinguishing between certain colors, due to deficiencies in the color-sensing cones in the eye.

Fovea

A minuscule dip in the retina of the eye that is the location of the greatest visual sharpness.

Blind Spot

An area in the field of vision that is not detected by the eye, where the optic nerve connects to the retina, or metaphorically, an area of ignorance or lack of awareness.

Retina

A layer at the back of the eyeball containing cells that are sensitive to light and trigger nerve impulses that pass via the optic nerve to the brain, where a visual image is formed.