Which of the Following Statements Is FALSE

question 26

Multiple Choice

Which of the following statements is FALSE?

• A)Rather than relying on the efficiency of a single portfolio (such as the market),multifactor models rely on the weaker condition that an efficient portfolio can be constructed from a collection of well-diversified portfolios or factors.
• B)A positive alpha in a single-factor model means that the portfolios that implement the trading strategy capture risk that is not captured by the market portfolio.
• C)Multifactor models have a distinct advantage over single-factor models in that it is much easier to identify a collection of portfolios that captures systematic risk than just a single portfolio.
• D)Trading strategies based on market capitalization,book-to-market ratios,and momentum have been developed that appear to have zero alphas.

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Definitions:

Monthly Payment

A fixed amount of money paid each month for a loan or mortgage over a set term.

Loan

Money that is loaned and needs to be paid back, including interest.

Compounded Semi-annually

Interest calculation method where interest is added to the principal amount twice a year, leading to the interest being compounded for the second term.

Goal

An intended outcome or target that an individual or organization aims to achieve.