Correlation Question - Appraisal Data vs. High-Frequency Data

CFA Level III
#1

In reviewing the 2011 PM mock, I came across questions 26 and 27 which bugged me.

The answer to 26 explains how the use of appraisal data (less-frequent valuations) causes correlations with other assets to be biased downward in absolute value. I get this, I agree with this, I remember reading this.

Then, moving onto 27, the answer explains how high-frequency data is more sensitive to asynchronism and, thus, tends to produce lower correlation estimates.

I’m obviously missing something fundamental here? Where is the line drawn?

#2

I’m wondering the same thing. I found this topic that I think helps

http://www.analystforum.com/forums/cfa-forums/cfa-level-iii-forum/91153903

#3

Yes since it is more sensitive to asychronism discrepancy of stale data you get lower correlation than what actual data would give.

#4

yeah… i have the same question. confused here…