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:

Exponent

The number of times that the base is used in repeated multiplication.

Solve For Vf

The process of calculating the future value of an investment or loan based on given variables and interest rates.

Nearest Cent

Rounding a monetary amount to the closest hundredth of a dollar.

Solve For P

The process of finding the value of the variable 'P' in a mathematical equation.