Page 217 Vol 1 question 10.
Answer states: “No, because terminated accounts are excluded”
Then one of the recommendations for Performance Presentation is “ Include terminated accounts as part of historical performance and clearly state when they were terminated."
Do these two conflict with each other? I have been looking at this question for 15 minutes including a previous post. Still have no clue. Can someone explain, please? Thank you!
? what are you smoking willis??
look at it again, and maybe read the topic 1st then read the subtopic below it. shouldn’t take 15 minutes.
Thanks for the response! I don’t smoke and rarely drink as well.
The question asked if his performance presentation policy conforms with CFA Standards?
Answer A: " no, because terminated accounts are excluded."
Explanation is “Standard III (D) states that both terminated and active accounts must be included as part of performance history.”
However,one of the recommendations for Performance Presentation is “ Include terminated accounts as part of historical performance and clearly state when they were terminated.”
This is why I am confused why the answer explains terminated account is required while it is recommended. Maybe I am missing a simple concept here but any clarification would be appreciated!
If you exclude terminated accounts from any performance presentation, you will have survivorship bias and thus results biased upward to best performers.
I totally agree! But why they list that in the recommended section not required section? I mean, if we see something listed in the recommended section, do we assume it could be required as well?
Fail this and next year exam and maybe it will become required in next edition about 2020.
IMO, reason, not only related to GIPS, but with parallel to other standards, about something is recommended and not required may be in trivial nature. Some asset managers companies maybe cannot adopt related to some issues which may cause account termination if it was absolutely required under each circumstance. But, maybe someone from Asset management who has real experience with GIPS may prove it.
Lol. No more CFA after June! I still need to work on GMAT and FRM tests so plenty of other tests to take.
Guess this is an inconsistency in the book.
I am just learning some things as it is. Especially with GIPS which will probably have 5 new editions in next 20 years, so in 2040 curriculum may have 300 pages.
Lol. Guess I will never want to take that CIPM test then
I’m pretty sure the recommendation only says to follow GIPS, however if you don’t follow GIPS it gives like 8 things you must do in order to comply with Standard III (D).
That’s why I said to read the subtitle because it says that.
I only read the examples from the CFA test… I see. They listed 5 points with compliance without applying GIPS Standards.
Do you know any other standard’s recommendation is required under GIPS in addition to those 5?
you only read the example and didn’t bother looking back at the book to clarify???
well you definitely deserve to miss that and any other question you are going to get lazy on. It’s one thing to ask for clarity on something, it’s another to ask to be feed.