Which of the Following Statements Is FALSE

question 9

Multiple Choice

Which of the following statements is FALSE?

• A)Nonzero alphas may merely indicate that the wrong market proxy is beings used;they do not necessarily indicate forgone positive NPV investment opportunities.
• B)The true market portfolio contains much more than just stocks,it includes bonds,real estate,art,precious metals,and any other investment vehicles available.
• C)If the true market portfolio is efficient,but the proxy portfolio is not highly correlated with the true market portfolio,then the true market portfolio will not be efficient and stocks will have nonzero alphas.
• D)Much of the investment wealth cannot be included in the proxy for the market portfolio since it does not trade in competitive markets.

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Definitions:

Novices

Individuals who are new to a subject, skill, or field, typically characterized by a limited understanding and experience.

Encapsulated

Enclosed securely in a covering or container, often used metaphorically to describe concepts that are self-contained.

Auto Mechanic

A skilled technician who specializes in repairing, maintaining, and sometimes customizing automobile engines and systems.

Fluid Abilities

Cognitive abilities involving the capacity to think logically and solve problems in novel situations, independent of acquired knowledge.