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

question 47

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 above

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Definitions:

First Instinct Fallacy

The mistaken belief that an individual's first choice or gut reaction is always the correct or best one.

Statistical Regression

A statistical technique that determines the relationship between a dependent variable and one or more independent variables to predict the outcome of the dependent variable.

Errors And Biases

Systematic deviations from norm or rationality in judgment, whereby inferences about other people and situations may be drawn in an illogical fashion.

Cognitive Errors

Cognitive errors refer to systematic flaws or biases in human reasoning and perception that can lead to incorrect judgments, decisions, or interpretations.