Which of the Following Statements Is False

question 99

Multiple Choice

Which of the following statements is false?

• A) Because of the higher and uncompensated risk involved, no investor should choose a portfolio with a negative alpha.
• B) Because the average portfolio of all investors is the market portfolio, the average alpha for all investors is zero.
• C) The market portfolio can be inefficient if a significant number of investors misinterpret information and believe they are earning a positive alpha when they are actually earning a negative alpha.
• D) If no investor earns a positive alpha, then no investor can earn a negative alpha, and the market portfolio must be efficient.

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Definitions:

Nonconsenting Third Parties

Individuals or groups affected by a transaction between other parties without their explicit agreement or participation.

Nonexcludable

A characteristic of a good or service that prevents the owner from effectively excluding others from using it, often associated with public goods.

Nonrival-in-consumption

A property of certain goods where one individual's consumption does not diminish the ability of others to consume the same good.

Public Good

An item or service made available to all societal members at no cost, regardless of profit, by either governmental bodies or private individuals or groups.