Which of the following statements is FALSE?
A)Because of the higher and uncompensated risk involved,no investor should choose a portfolio with a negative alpha.
B)Because the average portfolio of all investors is the market portfolio,the average alpha for all investors is zero.
C)The market portfolio can be inefficient if a significant number of investors misinterpret information and believe they are earning a positive alpha when they are actually earning a negative alpha.
D)If no investor earns a positive alpha,then no investor can earn a negative alpha,and the market portfolio must be efficient.

Question

Quizplus · Accepted Answer

This statement is false because although portfolios with negative alpha do involve higher and uncompensated risk, some investors may still choose them as a part of their investment strategy, especially if they have a higher risk appetite or an expectation of higher returns in the long run.

Which of the Following Statements Is FALSE