Above, average, or below?

CFA Level III
#1

If your client doesn’t want to lose more than 12% a year.

#2

it should be part of willingness and whether it is avg or below avg will depend on the full context…

#3

I will put below on exam.

#4

below

#5

tricky. I dont remember i think 12% is still might be below not sure. 10% is 100% below

#6

i don’t believe there a rule on what the cut off point is, all will be based on the context, but in most examples I saw 12% was below

#7

so i’m guessing 15% would be average.

#8

no > 14% above average

#9

12 def below average according to practice exams. In fact I can’t remember an example where shortfall risk was given and it wasn’t below average willingness. Any more good risk threshholds?

#10

i think for the most part if someone specifically mentioned a loss threshold, the idea was that they were automatically dinged a notch just for being focused on the point - - that’s at least the guidance schweser is giving - - all too subjective for me - - - but i’ve never seen anything definitive based on numbers along

#11

in 2006 exam. that soccer player with a deep pocket of 50+ mil asked for 8.73% of after-tax return, but still of above average tolerance. i think it’s dangerous to consider a cut-off rate.

#12

damn…I would have though 10% would be average. Bad me. Makes sense though now that I think about…

#13

Guys, there are no set in stone rules on this. It is totally based on the situational factors. Age, net worth, expenditures, etc. I wouldn’t try and make any assumptions based on what past exams or questions used as below average or average for s.d or returns. You setting yourself up for mistakes when the cfai throw you a curve which we all know will be there.

#14

I’m with cvillecfa - I think any mention of a maximum loss suggests risk aversion and below average tolerance.