Which of the Following Statements Is FALSE

question 27

Multiple Choice

Which of the following statements is FALSE?

• A)We can improve the performance of our portfolio by selling stocks with negative alphas.
• B)The market portfolio is on the SML,and according to the CAPM,since all other portfolios are inefficient,they will not fall on the SML.
• C)The difference between a stock's expected return and its required return according to the security market line is called the stock's alpha.
• D)The risk premium for any security is proportional to its beta with the market.

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Definitions:

Accounting Standards

Guidelines established by authoritative bodies that dictate how financial transactions and elements should be recorded and reported in financial statements.

Regulation S-X

A set of rules issued by the Securities and Exchange Commission (SEC) that dictates the form and content of financial statements submitted by publicly traded companies.

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A theoretically based guide developed by the Financial Accounting Standards Board for creating financial accounting and reporting standards.

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The individuals serving on the Financial Accounting Standards Board, responsible for establishing and improving standards of financial accounting and reporting in the U.S.