9) 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.

Answer:

Explanation:

10) Which of the following statements is false?

A) The most important example of non-tradeable wealth is human capital.

B) If investors have a significant amount of non-tradeable wealth, this wealth will be an important part of their portfolios, but will not be part of the market portfolio of tradeable securities.

C) If the entire portfolio of investments is efficient, then just the tradeable part of the portfolio should be efficient also.

D) Researchers have found evidence that the presence of human capital can explain at least part of the reason for the inefficiency of the most commonly used market proxies.

Answer:

Explanation:

11) What does the existence of a positive alpha investment strategy imply?

Answer: If, indeed, these alphas are positive, we are left to draw one of two conclusions:

1.

2.

12) Explain why the market portfolio proxy may not be efficient.

Answer: