Safely assume that mutual funds cannot borrow to invest, while hedge funds can borrow to invest. Theoretically the Security Market Line (SML) has an increasing relationship between the security beta and expected returns. However, in empirical tests the SML is found to be due to .......... A. Too Flat because mutual funds and hedge funds overinvest in high beta stocks B. Too Flat because mutual funds, but not hedge funds, overinvest in high beta stocks C. Too Steep because mutual funds and hedge funds overinvest in high beta stocks D. Too Steep because mutual funds, but not hedge funds, overinvest in high beta stocks E. Very close to the theoretical prediction of the SML given that short sellers' high shorting demand for high beta stocks counters the high mutual funds and hedge funds demand, thereby generating the Betting against Beta Effect