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:

Bass

Refers to a key theory or individual notable in leadership or musical fields, requiring context for a specific definition.

Emergent

Refers to processes or patterns that arise spontaneously or naturally within systems or organizations, not due to a specific plan.

Trait

A distinguishing quality or characteristic, typically one belonging to a person.

Process

A series of actions or steps taken to achieve a particular end.