Which of the Following Statements Is False

question 11

Multiple Choice

Which of the following statements is false?

• A) Because expected returns are not easy to estimate, each portfolio that is added to a multifactor model increases the difficulty of implementing the model.
• B) The self-financing portfolio made from high minus low book-to-market stocks is called the high-minus-low (HML) portfolio.
• C) The FFC factor specification was identified a little more than ten years ago. Although it is widely used in academic literature to measure risk, much debate persists about whether it really is a significant improvement over the CAPM.
• D) A trading strategy that each year short sells portfolio S (small stocks) and uses this position to buy portfolio B (big stocks) has produced positive risk adjusted returns historically. This self-financing portfolio is widely known as the small minus big (SMB) portfolio.

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Definitions:

Descriptive Studies

Research methods focused on describing the characteristics of a population or phenomenon being studied without influencing it.

Experimental Designs

Structured research strategies used to test hypotheses by manipulating variables to assess their effect on an outcome.

Stratified Random Sampling

A sampling method that involves dividing the population into distinct subgroups and then randomly selecting samples from each subgroup to ensure representation.

Annual Income

The total amount of money earned or received by an individual or entity within one calendar year.