Alpha Forecasts Must Be ____________ to Account for Less-Than-Perfect Forecasting

question 48

Multiple Choice

Alpha forecasts must be ____________ to account for less-than-perfect forecasting quality.When alpha forecasts are ____________ to account for forecast imprecision, the resulting portfolio position becomes ____________.

• A)shrunk; shrunk; far less moderate
• B)shrunk; shrunk; far more moderate
• C)grossed up; grossed up; far less moderate
• D)grossed up; grossed up; far more moderate

---

Definitions:

Book Value

Book Value is the value of an asset as recorded on the company's balance sheet, representing the asset's cost minus accumulated depreciation or amortization.

Deferred Tax Asset

An accounting term used to describe a situation where a company has paid more taxes to the government than it has shown as an expense in its financial statements, which can be used to reduce future tax liability.

Capital Cost Allowance

A tax deduction available in some jurisdictions for tangible and intangible assets, allowing businesses to write off the cost of assets over their useful life.

Straight-Line Depreciation

A method of allocating the cost of a tangible asset over its useful life in a linear fashion, resulting in a constant annual depreciation expense.