In the solution, CFAI says “Use longer measurement interval will help to lower anualized volatility estimates.”

The same mentioned in page 87, book 5…

What I can explain for this situation in the example below:

Assum dailly standard dev is 2%

monthly standard dev = 2% * 20^1/2 =8.94% (1)

anualized from dailly = 2% * 250^1/2 = 31.62% (2)

Anualized from monthly = 8,94 * 12^1/2 = 30,98% (3)

- Now we compare the 2 cal:

(3) can be calculated by composing (1) and (3):

Anualized = 2% * (20^1/2) * (12^1/2) = 2% * 240^1/2 = 30,98.

The difference btw (2) and (3) is that, (2) use 250 trading days while (3) use 240 days. -> sure that (3) alway less than (2) mathematically.

So the conclusion of CFAI comes from their assumption that there are 20 trading days in a month ??? (The 2 calculation will be the same if 20.83 days of trading in a month)

any miss?