Problem 2: True/False (explain IN FULL AND PRECISELY your reasoning): a) The CAPM predicts that a can be zero or positiv

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Problem 2 True False Explain In Full And Precisely Your Reasoning A The Capm Predicts That A Can Be Zero Or Positiv 1 (34.91 KiB) Viewed 31 times

Problem 2: True/False (explain IN FULL AND PRECISELY your reasoning): a) The CAPM predicts that a can be zero or positive, but it should never be negative, otherwise the SML is not well defined; b) According to Arbitrage Pricing Theory, there cannot be arbitrage if we can construct tracking portfolios with the same loadings of the original securities present in the market; c) Arbitrage Pricing Theory does not make assumption about investors' preferences and endowments; d) No arbitrage implies that we cannot make profits in the market.