- CFA Exams
- CFA Level I Exam
- Topic 8. Alternative Investments
- Learning Module 2. Alternative Investment Performance and Returns
- Subject 2. Calculating Fees and Returns
CFA Practice Question
When a new hedge fund is added to a hedge fund index, the fund's historical performance is then included in the index's historical performance. The potential problem with this practice is:
B. Survivor and backfill biases.
C. Autocorrelation that results in artificially low standard deviations.
D. Limited track record.
A. Hedge funds in index are subject to turnover.
B. Survivor and backfill biases.
C. Autocorrelation that results in artificially low standard deviations.
D. Limited track record.
Correct Answer: B
Only funds that survived will be reported and included in the index.
User Contributed Comments 2
| User | Comment |
|---|---|
| pjb64 | the same can be said of mutual funds, I don't know why CFA has it out for hedge funds. |
| Fabulous1 | Because this is the hedge fund chapter. It was also mentioned for mutual funds in a previous one. |