Which of the Following Statements Is False

question 58

Multiple Choice

Which of the following statements is false?

• A) Investors may have different information regarding expected returns, correlations, and volatilities, but they correctly interpret that information and the information contained in market prices and they adjust their estimates of expected returns in a rational way.
• B) Investors may learn different information through their own research and observations, but as long as they understand the differences in information and learn from other investors by observing prices, the CAPM conclusions still stand.
• C) Every investor, regardless of how much information he has access to, can guarantee himself an alpha of zero by holding the market portfolio.
• D) The CAPM requires making the strong assumptions of homogeneous expectations.

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Definitions:

Counterconditioned

The process of changing a previously undesirable response to a stimulus into a desirable one through conditioning.

Negative Reinforcement

A behavioral concept where the removal of an unfavorable outcome or stimulus strengthens a particular behavior.

Operant Conditioning

A method of learning that occurs through rewards and punishments for behavior, encouraging the subject to associate certain behaviors with certain outcomes.

Unconditioned Response

An unconditioned response is a naturally occurring response elicited by an unconditioned stimulus without the need for learning.