alpha beta seperation

“The trust Officer at the bank may want to suggest an alpha beta seperation approach. This approach is particularly useful in less efficient markets such as small-cap markets”

Correct or Incorrect?

I chose correct given that the alpha return is achieved in small cap markets (I know that the beta will come from a large cap efficient market).

The correct answer is “Incorrect”. The logic being that the beta is achieved in large-cap markets. Any thoughts why the answer ignores where the alpha comes from?

Just re-read my notes. Think I get it - although the alpha can come from a small cap market, it’s expensive to short in a small cap market…