QUESTIONS 25 TO 30 RELATE TO PERFORMANCE ATTRIBUTION MINGLU LI CASE SC...

28. A comparison between the survey data containing projections of the CCI and TELI and the

actual CCI and TELI most likely exhibits:

A. a status quo trap.

B. a recallability trap.

C. ex post risk being a biased measure of ex ante risk.

Answer = C

“Capital Market Expectations,” John P. Calverley, Alan M. Meder, Brian D. Singer, and Renato

Staub

2013 Modular Level III, Vol. 3, Reading 18, Section 2.2.4

Study Session 6–18–b, d

Discuss in relation to capital markets expectations, the limitations of economic data, data

measurement errors and biases, the limitations of historical estimates, ex post risk as a biased

measure of ex ante risk, biases in analysts’ methods, the failure to account for conditioning

information, the misinterpretation of correlations, psychological traps, and model uncertainty.

Explain the use of survey and panel methods and judgment in setting capital markets

expectations.

C is correct. As stated, the projections in the survey data tended to be more volatile than the

actual outcomes over the same time period. This finding indicates that the ex post risk (i.e., the

volatility of the actual data) tends to have a downward bias relative to the ex ante risk displayed

by the survey data. This result is evidence of ex post risk being a biased measure of ex ante risk.