Question

n capital markets theory, several behavioral assumptions are made. Which of the following is NOT a standard assumption?

• A. Portfolio risk is reduced by combining assets with low correlations.
• B. Investors make decisions based on two parameters: risk and return.
• C. The theoretical investment horizon is a single (undefined) time period.
• D. Some investors are smarter than others: they have more knowledge

Answer 1

Option d is correct option, as this statement is incorrect that some investors have more knowledge and capital market theory assumes that all have same information and knowledge.

All other option are correct assumptions.