According to the Capital Asset Pricing Model (CAPM), correctly priced securities:
A. have zero alphas
B. have positive betas
C. have positive alphas
D. have non-zero alphas
E. have negative betas

A) have zero alphas

Explanation:

Stock's alpha show show much they have over or under performed in relation to similar peer stocks. But if the stocks were correctly priced, then alpha should be 0 since no variation, either positive or negative should occur. Alpha basically measures the error in the stock's valuation. It is always better to have positive alphas because if you make a mistake then hopefully is in your favor, but alphas can also be negative and that equals unexpected losses.

This is why the CAPM model only considers beta in its calculation.

the correct choice is a