QUESTIONS 109 THROUGH 114 RELATE TO ALTERNATIVE INVESTMENTS.

114. An index provider has created a new investable index that tracks the hedge fund industry. Any

fund that follows a long/short equity strategy can enter the index. The index provider places

new constituents in the index at the end of each year and incorporates the new funds’ track

record in the database. Which of the following is least likely a bias that might distort the

historical performance of the index?

A. Backfilling.

B. Self-selection.

C. Tracking error.

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