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:

Organisms

Living entities that can carry out life processes independently, ranging from bacteria to plants and animals.

Chemical Bonds

The attractive forces that hold atoms together in compounds, forming molecules and various types of structures.

Mucus

A sticky, slimy substance produced by mucous membranes and glands for lubrication and protection of certain parts of the body.

Thickness

The measurement of how thick an object is, usually referenced in contexts varying from material properties to medical conditions like the thickness of a blood vessel wall.