Q. Infrequently traded assets in a portfolio effect the measurement of portfolio risk by: A. Overestimating true risk B. No effect on true risk C. Underestimating true risk
C Volatility is understated because the asset doesn’t change enough in value since it is infrequently traded.
C - this is about the first question I will answer on this forum for this final level! studying from the CFAI had taken a lot of my time.
Agreed C. But i am assuming you are refering to total risk when you say “true risk”.
C Assuming non-trading means deviating from the benchmark, that would increase misfit risk. Total risk would stay the same, so true active risk would have to decrease.
C, vol is understated …heres one what is anynchronism and what effects does it have on port risk?
Yea you guys are correct!