Which of the Following Statements Is False

question 11

Multiple Choice

Which of the following statements is false?

• A) Because expected returns are not easy to estimate, each portfolio that is added to a multifactor model increases the difficulty of implementing the model.
• B) The self-financing portfolio made from high minus low book-to-market stocks is called the high-minus-low (HML) portfolio.
• C) The FFC factor specification was identified a little more than ten years ago. Although it is widely used in academic literature to measure risk, much debate persists about whether it really is a significant improvement over the CAPM.
• D) A trading strategy that each year short sells portfolio S (small stocks) and uses this position to buy portfolio B (big stocks) has produced positive risk adjusted returns historically. This self-financing portfolio is widely known as the small minus big (SMB) portfolio.

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Definitions:

Interdependence

Denotes a mutual reliance among members of a group or between groups, where actions of one have an effect on the others.

Cohesiveness

The degree to which members of a group or team are attracted to each other and motivated to stay in the group, influencing team dynamics and performance.

Norms

Implicit or explicit rules that govern the behavior of members within a group or society, shaping expectations and social conduct.

Process Losses

Refers to the decrease in efficiency or productivity in a team due to coordination and motivation problems.