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Basic Question 7 of 9
When a new hedge fund is added to a hedge fund index, the fund's historical performance is then included in the index's historical performance. The potential problem with this practice is:
B. Survivor and backfill biases.
C. Autocorrelation that results in artificially low standard deviations.
D. Limited track record.
A. Hedge funds in index are subject to turnover.
B. Survivor and backfill biases.
C. Autocorrelation that results in artificially low standard deviations.
D. Limited track record.
User Contributed Comments 2
| User | Comment |
|---|---|
| pjb64 | the same can be said of mutual funds, I don't know why CFA has it out for hedge funds. |
| Fabulous1 | Because this is the hedge fund chapter. It was also mentioned for mutual funds in a previous one. |
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Learning Outcome Statements
calculate and interpret alternative investment returns both before and after fees
CFA® 2024 Level I Curriculum, Volume 5, Module 2.