Which of the following statements is false?
A) When an investor chooses her optimal portfolio, she will do so by finding the tangent line using the risk-free rate that corresponds to her investment horizon.
B) If the market portfolio is not efficient, savvy investors who recognize that the market portfolio is not optimal will push prices and expected returns back into balance.
C) Even though different investors may research different stocks, their information will not impact the market portfolio since there is no way to share this information with other investors.
D) In the real world borrowers pay higher interest rates than savers receive.

Question

Quizplus · Accepted Answer

This statement is not true because information can be shared with other investors in a variety of ways, such as through financial news outlets or social media platforms, which can then affect the market portfolio. The other statements are true. A) This is a key principle of modern portfolio theory. B) This is known as the "efficient market hypothesis," which suggests that the market will eventually correct itself. D) This is due to the risk premium, which compensates savers for lending their money and borrowers for taking on debt.

Which of the Following Statements Is False