When Testing Mutual Fund Performance Over Time, One Must Be

question 79

Multiple Choice

When testing mutual fund performance over time, one must be careful of ________, which means that a certain percentage of poorer-performing funds fail over time, making the performance of remaining funds seem more consistent over time.

• A) survivorship bias
• B) lucky event bias
• C) magnitude bias
• D) mean reversion bias

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Definitions:

Revenue Recognition

Accounting principle determining when revenue should be recorded in the financial statements, typically at the time goods or services are provided.

Book Value

The net value of a company's assets found on its balance sheet, calculated as total assets minus intangible assets and liabilities.

Carrying Amount

The value at which an asset or liability is recorded on the balance sheet, including depreciation or amortization.

Reasonable Degree

A reasonable degree refers to an acceptable level of certainty or accuracy, often used to describe the precision expected in estimates or judgments.