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 options

Question

Quizplus · Accepted Answer

Alpha forecasts must be shrunk to account for less-than-perfect forecasting quality.When alpha forecasts are shrunk to account for forecast imprecision, the resulting portfolio position becomes far more moderate.

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