Which of the Following Statements Is False

question 29

Multiple Choice

Which of the following statements is false?

• A) If indeed alphas are positive, it is possible that the positive alpha trading strategies contain risk that investors are unwilling to bear but that the CAPM does not capture.
• B) If indeed alphas are positive, it is possible that the costs of implementing investment strategies are larger than the NPVs of undertaking them.
• C) If indeed alphas are positive, then investors have to be systematically ignoring positive-NPV investment opportunities.
• D) The only way a positive-NPV investment opportunity can exist in a market is if some barrier to entry restricts competition.

---

Definitions:

Cost Leadership Strategy

A business strategy aiming to achieve the lowest production and operation costs within an industry to offer products or services at a lower price than competitors.

Low-Cost Producer

A company that can produce and sell goods or services at a lower cost than its competitors.

IFAC's Code of Ethics

A set of ethical standards and guidelines developed by the International Federation of Accountants to promote integrity, objectivity, and professionalism among accountants.

Cost-Benefit Analysis

A decision-making process that compares the costs of an action or investment to the benefits derived, to assess its feasibility or value.