Which of the Following Statements Is False

question 1

Multiple Choice

Which of the following statements is false?

• A) As a practical matter, it is extremely difficult to identify portfolios that are efficient because we cannot measure the expected return and the standard deviation of a portfolio with great accuracy.
• B) The portfolios in a multifactor model can be thought of as either risk factors themselves or portfolios of stocks correlated with unobservable risk factors.
• C) Each factor beta is the expected percent change in the excess return of a security for a 1% change in the excess return of the factor portfolio.
• D) Even if the market portfolio is not efficient, it still must capture all components of systematic risk.

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Definitions:

Implied Warranty

An unwritten guarantee that the product sold meets certain criteria for usability and satisfaction.

Merchantability

A warranty, often implied by law, that goods sold are fit for the general purpose for which they are sold.

Fitness for a Particular Purpose

A legal warranty implying that a sold good is suitable for the specific use intended by the buyer, as made known to the seller at the time of purchase.

Comparative Fault

A legal doctrine that reduces the amount of damages a plaintiff can recover in a negligence-based lawsuit, based on the degree to which the plaintiff's own negligence contributed to the harm.