Instruction: For each statement, begin by answering whether the statement is true or false. If you think a statement is false, explain your answer in ONE or TWO SENTENCES. If you think a statement is true, no explanation is required.

1. The dollar-weighed return is a risk-adjusted return because its calculation considers the size and sign of the cash flows which reflects its risk.

1. Like the CAPM model, the APT model is also based on the premise that the total risk of an asset's returns can be decomposed into systematic and unsystematic risks.

1. The observation that the stock market earns abnormal returns in every January provides supportive evidence that the market is semi-strong efficient.

1. According to prospect theory, individual investors are not always risk averse that they may be risk-seeking when they are faced with expected losses.

While options can be used to reduce systematic risk of stocks, they cannot reduce unsystematic risk of stocks because unsystematic risk can only be reduced through diversification