Which of the Following Statements Is False

question 12

Multiple Choice

Which of the following statements is false?

• A) If the CAPM correctly computed the risk premium, investors would stop investing only when they expected the alpha of an investment strategy to be negative.
• B) If the CAPM correctly computes the risk premium, an investment opportunity with a positive alpha is a positive-NPV investment opportunity.
• C) If the CAPM correctly computes the risk premium, investors should flock to invest in positive alpha stocks.
• D) Anyone can implement a momentum trading strategy and therefore generate a positive investment opportunity.

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Definitions:

Classical Conditioning

A learning process through which associations are formed between a neutral stimulus and an unconditioned stimulus, leading to a learned response.

Low-Balling

A sales tactic where an initially low price is offered to attract a buyer before it is increased by adding costs or changing conditions.

Foot-In-The-Door

A persuasion technique where agreement to a small request increases the likelihood of compliance with a larger request later.

Cognitive Components

The mental processes involved in perception, memory, judgment, and reasoning, which are fundamental to understanding and responding to the environment.