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

question 35

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
• E) None of the options are correct.

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Definitions:

Active Approach

A policy or management style that involves regular, dynamic decision-making and interventions to achieve specific goals, in contrast to a passive, hands-off approach.

Discretionary Policy

Discretionary Policy involves the deliberate use of monetary or fiscal policy changes by government policymakers to address economic issues.

Monetary Policy

Actions undertaken by a central bank to control the supply of money and interest rates in its economy.

Fiscal Policy

Government policies related to taxation and government spending to influence the economy.