Question #1 of 16 Question ID: 1687141
A risk-averse investor is most likely to desire which of the following attributes of a multivariate
return distribution?
A) Negative skewness.
B) Positive skewness.
C) Excess kurtosis.
Question #2 of 16 Question ID: 1687128
Which of the following statements about backtesting an investment strategy is least accurate?
Backtesting:
A) lends rigor to the investment process.
B) ensures that a strategy will perform well in the future.
C) approximates the real-life investment process.
Question #3 of 16 Question ID: 1687140
In the presence of return distribution asymmetry and excess kurtosis, the most appropriate
approach would be to make use of a Monte Carlo simulation using a:
A) F-distribution.
B) skewed Student’s t-distribution.
C) normal distribution.
Question #4 of 16 Question ID: 1687133
A rolling-window backtesting is most accurately described when:
A) a data set is divided into two distinct samples.
B) repeated sampling from the same data set leads to the use of redundant sources.
C) the out-of-sample data becomes the in-sample data for the subsequent period.
Question #5 of 16 Question ID: 1687129
Which of the following statements about backtesting an investment strategy is least accurate?
Backtesting is:
A) useful as a rejection or acceptance criterion for an investment strategy.
B) widely used by managers that use a fundamental investment style.
C) a new methodology that is slowly gaining acceptance in the investment community.
Question #6 of 16 Question ID: 1687143
In conducting a sensitivity analysis, an analyst is most likely to take fat tails and negative
skewness into account by repeating a Monte Carlo simulation using a multivariate:
A) skewed Student’s t-distribution.
B) Bernoulli distribution.
C) normal distribution.
Question #7 of 16 Question ID: 1687142
In the historical simulation approach, bootstrapping is most likely to be used when:
A) the number of trials is larger than the dataset.
B) zero-coupon rates are available but par yields are unknown.
C) a merger transaction impacts earnings.
Question #8 of 16 Question ID: 1687134
Which of the following metrics are most likely to be reported in a backtest of an investment
strategy?
A) Maximum drawdown, Sharpe ratio, and Sortino ratio.
B) Altman Z-score, Sloan ratio, and Beneish M-score.
C) Enterprise value, volume, and market capitalization.
Question #9 of 16 Question ID: 1687137
Bill Cassidy, CFA, is the portfolio manager for Applied Logistics pension fund. Cassidy is meeting
with Alex Swary, the senior quantitative analyst, to discuss the results of backtesting of a model
developed by Swary. The model uses several factors in selecting stocks, including EPS growth
over the past year, the industry competitiveness index, and price-to-book ratio. The model
makes picks on the first trading day of each calendar year with annual rebalancing.
While evaluating the results of backtesting, Cassidy should be most likely concerned with:
A) look-ahead bias.
B) data snooping bias.
C) survivorship bias.
Question #10 of 16 Question ID: 1710290
Which of the following statements about backtesting an investment strategy is least accurate?
Backtesting:
A) is based on the implied assumption that the future will somewhat resemble history.
B) is usually conducted over long periods.
C) is incompatible with quantitative and systematic investment styles.
Question #11 of 16 Question ID: 1687135
Which of the following identifies problems that are most likely to arise in a backtest of an
investment strategy?
A) Including lagged dependent variables as independent variables.
B) Survivorship bias, look-ahead bias, and data snooping.
C) Heteroskedasticity, serial correlation, and multicollinearity.
Question #12 of 16 Question ID: 1687132
Which of the following most accurately describes the steps in backtesting an investment
strategy?
Conceptualization of the modeling task, data collection, data preparation and
A)
wrangling, data exploration, and model training.
B) Strategy design, historical investment simulation, and analysis of output.
Obtain estimates of the regression parameters, determine the assumed values of the
C)
independent variables, and compute the predicted value of the dependent variable.
Question #13 of 16 Question ID: 1687139
Which of the following is least likely an example of historical stress testing?
Backtesting the performance of the strategy, assuming that the CBOE VIX Index is
A)
greater than 55.
Backtesting the performance of the strategy during the high market return period of
B)
2017–2018.
Backtesting the performance of the strategy during the great recession, a period
C)
following the global financial crisis of 2008.
Question #14 of 16 Question ID: 1687138
Which of the following most accurately describes a scenario analysis?
A) Backtesting a model during periods of high volatility and periods of low volatility.
B) Backtesting a model using U.S. market data as well as using the European market data.
C) Backtesting a model for large-cap securities as well as for medium-cap securities.
Question #15 of 16 Question ID: 1687131
Which of the following most accurately describes a step in backtesting an investment strategy?
A) In the “strategy design” step, we form investment portfolios for each period.
B) In the “historical investment simulation” step, we rebalance the portfolio periodically.
In the “historical investment simulation” step, we calculate portfolio performance
C)
statistics.
Question #16 of 16 Question ID: 1687136
Which of the following is the least likely to result from using information that would have been
unavailable at the time of the investment decision?
A) Survivorship bias.
B) Look-ahead bias.
C) Data snooping.