CAIA LEVEL 1 EXAM REVIEW
QUESTIONS WITH CORRECT ANSWERS
Absolute Returns - Answer-An absolute return standard means that returns are
evaluated relative to the riskless rate, or zero, and therefore independently of
performance in equity markets, debt markets, or any other markets.
Jarque-Bera test - Answer-involves a statistic that is a function of
the skewness and excess kurtosis of the sample: JB = (n∕6)[S2
+ (K2 ∕4)] where JB is the Jarque-Bera test statistic, n is the
number of observations, S is the skewness of the sample, and
K is the excess kurtosis of the sample. TEST STATISTIC > CRITICAL VALUE =
REJECT NULL
Distribution Value to Pay-in-ratio - Answer-Does not depend on changes in NAV
Treynor Ratio - Answer-(Expctd rtrn - RF)/ Beta
Ex Post Alpha - Answer-Return attribution analysis best tool
Beta Expansion - Answer-observed during down market cycles and primarily higher
correlation between HF & systematic returns
P-Value - Answer-Accept null if greater than significance level
Data dredging - Answer-overusing statistical rests to identify significant relationships
with little regard for underlying economic rationale
Data mining - Answer-vigorously testing data until valid relationships are found
Asset gatherer - Answer-deliver beta as cheaply and efficiently as possible
NOI - Answer-taxes, insurancem operating costs
REITs - Answer-dividends taxed at investor level; prices determined by market
idiosyncratic prepayments - Answer-prepayments not motivated by interest rates or
econ activity
benefits commodity trading advisors - Answer-diversification, performance , access,
transparency, liquidity, taxes, low FX risk
Weighted Moving Avg - Answer-
QUESTIONS WITH CORRECT ANSWERS
Absolute Returns - Answer-An absolute return standard means that returns are
evaluated relative to the riskless rate, or zero, and therefore independently of
performance in equity markets, debt markets, or any other markets.
Jarque-Bera test - Answer-involves a statistic that is a function of
the skewness and excess kurtosis of the sample: JB = (n∕6)[S2
+ (K2 ∕4)] where JB is the Jarque-Bera test statistic, n is the
number of observations, S is the skewness of the sample, and
K is the excess kurtosis of the sample. TEST STATISTIC > CRITICAL VALUE =
REJECT NULL
Distribution Value to Pay-in-ratio - Answer-Does not depend on changes in NAV
Treynor Ratio - Answer-(Expctd rtrn - RF)/ Beta
Ex Post Alpha - Answer-Return attribution analysis best tool
Beta Expansion - Answer-observed during down market cycles and primarily higher
correlation between HF & systematic returns
P-Value - Answer-Accept null if greater than significance level
Data dredging - Answer-overusing statistical rests to identify significant relationships
with little regard for underlying economic rationale
Data mining - Answer-vigorously testing data until valid relationships are found
Asset gatherer - Answer-deliver beta as cheaply and efficiently as possible
NOI - Answer-taxes, insurancem operating costs
REITs - Answer-dividends taxed at investor level; prices determined by market
idiosyncratic prepayments - Answer-prepayments not motivated by interest rates or
econ activity
benefits commodity trading advisors - Answer-diversification, performance , access,
transparency, liquidity, taxes, low FX risk
Weighted Moving Avg - Answer-
