Various Trading Strategies Appear to Offer Non-Zero Alphas When We

question 36

Multiple Choice

Various trading strategies appear to offer non-zero alphas when we examine real world data.If indeed these alphas are positive,it could be explained by any of the following EXCEPT:

• A)Investors are systematically ignoring positive-NPV investment opportunities.
• B)The market portfolio is inefficient,but the market portfolio proxy used to calculate the alphas is efficient.
• C)A stock's beta with the market portfolio does not adequately measure a stock's systematic risk.
• D)The positive alpha trading strategies contain risk that investors are unwilling to bear but the CAPM does not capture.

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Definitions:

Directive Leader

A leader who provides clear instructions, sets standards and guidelines, and expects subordinates to follow orders and procedures closely.

Directive Leader

A leader who provides clear expectations and specific directions to their followers.

Groupthink

A phenomenon where the desire for harmony or conformity in a decision-making group leads to an irrational or dysfunctional outcome.

Directive Group Leader

A leader in a group setting who guides, structures, and directs the group's activities and discussions.