Construct a zero-investment portfolio

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Answer whether each of the following statements is correct and explain your argument.

(a) The variance of a well-diversified portfolio is zero.

(b) Under an index model, the correlation between two well-diversified portfolios is one.

(c) Well-diversified portfolios with a positive α are overpriced.

(d) An arbitrage portfolio arises when two or more security prices enable investors to construct a zero-investment portfolio that will yield a positive expected return.

Reference no: EM133000355

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