Which of the Following Statements Is False

question 8

Multiple Choice

Which of the following statements is false?

• A) Rather than relying on the efficiency of a single portfolio (such as the market), multifactor models rely on the weaker condition that an efficient portfolio can be constructed from a collection of well-diversified portfolios or factors.
• B) A positive alpha in a single factor model means that the portfolios that implement the trading strategy capture risk that is not captured by the market portfolio.
• C) Multifactor models have a distinct advantage over single-factor models in that it is much easier to identify a collection of portfolios that captures systematic risk than just a single portfolio.
• D) Trading strategies based on market capitalization, book-to-market ratios, and momentum have been developed that appear to have zero alphas.

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Definitions:

Marginal-revenue Curve

A graphical representation that shows how marginal revenue varies as the quantity of output is changed.

Market Demand

The total quantity of a good or service that consumers are willing and able to purchase at various prices during a specific time period.

Elastic

Describes a situation where the demand or supply of a good or service changes significantly in response to price changes.

Fixed Costs

Expenses that remain consistent regardless of production or sales volume, like lease payments, wages, and insurance costs.