Which of the Following Statements Is FALSE

question 64

Multiple Choice

Which of the following statements is FALSE?

• A) If indeed alphas are positive, it is possible that the positive alpha trading strategies contain risk that investors are unwilling to bear but the CAPM does not capture.
• B) If indeed alphas are positive, it is possible that the costs of implementing investment strategies are larger than the NPVs of undertaking them.
• C) If indeed alphas are positive, then investors have to be systematically ignoring negative-NPV investments opportunities.
• D) The only way a positive NPV investment opportunity can exist in a market is if some barrier to entry restricts competition.

---

Definitions:

Selection Bias

A distortion of statistical analysis resulting from the method of collecting samples, leading to data that is not representative of the population being studied.

Magnitude Issue

Refers to the scale or size of an issue or problem, often implying its significance or impact in a particular context.

Momentum Effect

The tendency for securities that have performed well in the past to continue performing well in the future.

Martingale Effect

A theory in probability suggesting that past events do not influence future ones, often discussed in the context of gambling or investment strategies.