Various Trading Strategies Appear to Offer Non-Zero Alphas When We

question 38

Multiple Choice

Various trading strategies appear to offer non-zero alphas when we examine real world data.If indeed these alphas are positive,it could be explained by any of the following except:

• A) Investors are systematically ignoring positive-NPV investment opportunities.
• B) The market portfolio is inefficient, but the market portfolio proxy used to calculate the alphas is efficient.
• C) A stock's beta with the market portfolio does not adequately measure a stock's systematic risk.
• D) The positive alpha trading strategies contain risk that investors are unwilling to bear but the CAPM does not capture.

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Definitions:

Motivation

The internal and external factors that stimulate people to take actions that lead to achieving a goal.

Perception Of Emotions

The process by which individuals recognize and interpret emotions in themselves and others, often influencing behavior and decision-making.

Nonverbal Behaviour

Communication expressed through body movements, facial expressions, gestures, posture, and tone of voice, rather than through spoken words.

Emotions

Complex psychological states that involve three distinct components: a subjective experience, a physiological response, and a behavioral or expressive response.