Which of the Following Statements Is False

question 8

Multiple Choice

Which of the following statements is false?

• A) Rather than relying on the efficiency of a single portfolio (such as the market), multifactor models rely on the weaker condition that an efficient portfolio can be constructed from a collection of well-diversified portfolios or factors.
• B) A positive alpha in a single factor model means that the portfolios that implement the trading strategy capture risk that is not captured by the market portfolio.
• C) Multifactor models have a distinct advantage over single-factor models in that it is much easier to identify a collection of portfolios that captures systematic risk than just a single portfolio.
• D) Trading strategies based on market capitalization, book-to-market ratios, and momentum have been developed that appear to have zero alphas.

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Definitions:

Good Increases

Refers to a situation where the quantity or quality of goods available in a market or economy grows.

Excess Demand

Occurs when the quantity demanded of a product significantly exceeds its quantity supplied, often leading to a shortage.

Equilibrium Price

The price at which the quantity of a good or service supplied matches the quantity demanded, resulting in market stability.

Output

The total amount of goods or services produced by a business, industry, or economy.