Which of the Following Statements Is False

question 32

Multiple Choice

Which of the following statements is false?

• A) If the market portfolio is efficient, then all securities and portfolios must plot on the SML, not just individual stocks.
• B) For most stocks the standard errors of the alpha estimates are large, so it is impossible to conclude that the alphas are statistically different from zero.
• C) It is not difficult to find individual stocks that, in the past, have not plotted on the SML.
• D) Small stocks (those with lower market capitalization) have lower average returns.

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Definitions:

Income From Operations

refers to the earnings generated from the normal business activities of a company, excluding any income derived from investments or incidental sources.

Investment Centers

Division within a company that is treated as a separate unit for measuring its financial performance, often responsible for its revenues, expenses, and investments.

Profit Centers

Segments or departments within a company that are responsible for generating revenue and are evaluated on their profitability.

Net Income

The remaining income of a firm after deducting every expense and tax from the gross revenue.