CAIA TEST QUESTIONS AND CORRECT
VERIFIED ANSWERS|| LATEST 2025||
GRADED A+.
1. An asset-pricing model that attempts to explain how normative model.
investors should behave is a(n):
Normative models attempt
to explain how investors
should behave. Positive
models attempt to explain
how investors do behave.
Theoretical models use as-
sumptions and logic, while
empirical models are based
on historically observed be-
havior.
2. Henry Thompson examines a sample of returns for a The fund's returns tend to
private equity fund and finds that the sample excess be leptokurtic.
kurtosis equals 3. Regarding the private equity fund's
If excess kurtosis is pos-
returns, which of the following conclusions should
itive, the returns are lep-
Thompson reach?
tokurtic. The distribution of
leptokurtic returns is higher
at the peak, and fatter in the
tails, versus the normal dis-
tribution.
3. Asset-pricing models that describe differences across cross-sectional models.
subjects for a single point in time are most likely
Cross-sectional models de-
known as:
scribe ditterences across
subjects for a single point
in time. Normative models
attempt to explain how in-
,CAIA TEST QUESTIONS AND CORRECT
VERIFIED ANSWERS|| LATEST 2025||
GRADED A+.
vestors should
behave. Pos-
,CAIA TEST QUESTIONS AND CORRECT
VERIFIED ANSWERS|| LATEST 2025||
GRADED A+.
itive models attempt to ex-
plain how investors do be-
have. Empirical models are
based on historically ob-
served behavior.
4. Which of the following is NOT an input into a VaR The maximum loss estimate
calculation? is the output of the VaR cal-
culation, not an input.
5. A simulation recently was performed in which future Monte Carlo VaR.
scenarios are derived from an assumed model. The
simulated outcomes were used to indicate what types In a Monte Carlo VaR, a
of losses are possible for a hedge fund. Which type of model is developed that
simulates values for risk fac-
value at risk (VaR) method would most likely be used
tors (e.g., interest rates)
in this situation?
and estimates how changes
in risk factors attect the
fund's returns. The simu-
lation randomly generates
possible outcomes for the
fund, and those simulat-
ed outcomes measure the
amount of losses that are
possible for the fund.
6. The Formika Tactical Allocation hedge fund had poor Survivorship bias.
performance for two straight years and stopped re-
porting performance data to various hedge fund Survivorship bias refers to
databases. As a result, the Formika Fund was removed the fact that hedge funds
from those databases. This is an example of what potential type of
, CAIA TEST QUESTIONS AND CORRECT
VERIFIED ANSWERS|| LATEST 2025||
GRADED A+.
database bias? that stop reporting perfor-
mance data are removed
from the database. Since
VERIFIED ANSWERS|| LATEST 2025||
GRADED A+.
1. An asset-pricing model that attempts to explain how normative model.
investors should behave is a(n):
Normative models attempt
to explain how investors
should behave. Positive
models attempt to explain
how investors do behave.
Theoretical models use as-
sumptions and logic, while
empirical models are based
on historically observed be-
havior.
2. Henry Thompson examines a sample of returns for a The fund's returns tend to
private equity fund and finds that the sample excess be leptokurtic.
kurtosis equals 3. Regarding the private equity fund's
If excess kurtosis is pos-
returns, which of the following conclusions should
itive, the returns are lep-
Thompson reach?
tokurtic. The distribution of
leptokurtic returns is higher
at the peak, and fatter in the
tails, versus the normal dis-
tribution.
3. Asset-pricing models that describe differences across cross-sectional models.
subjects for a single point in time are most likely
Cross-sectional models de-
known as:
scribe ditterences across
subjects for a single point
in time. Normative models
attempt to explain how in-
,CAIA TEST QUESTIONS AND CORRECT
VERIFIED ANSWERS|| LATEST 2025||
GRADED A+.
vestors should
behave. Pos-
,CAIA TEST QUESTIONS AND CORRECT
VERIFIED ANSWERS|| LATEST 2025||
GRADED A+.
itive models attempt to ex-
plain how investors do be-
have. Empirical models are
based on historically ob-
served behavior.
4. Which of the following is NOT an input into a VaR The maximum loss estimate
calculation? is the output of the VaR cal-
culation, not an input.
5. A simulation recently was performed in which future Monte Carlo VaR.
scenarios are derived from an assumed model. The
simulated outcomes were used to indicate what types In a Monte Carlo VaR, a
of losses are possible for a hedge fund. Which type of model is developed that
simulates values for risk fac-
value at risk (VaR) method would most likely be used
tors (e.g., interest rates)
in this situation?
and estimates how changes
in risk factors attect the
fund's returns. The simu-
lation randomly generates
possible outcomes for the
fund, and those simulat-
ed outcomes measure the
amount of losses that are
possible for the fund.
6. The Formika Tactical Allocation hedge fund had poor Survivorship bias.
performance for two straight years and stopped re-
porting performance data to various hedge fund Survivorship bias refers to
databases. As a result, the Formika Fund was removed the fact that hedge funds
from those databases. This is an example of what potential type of
, CAIA TEST QUESTIONS AND CORRECT
VERIFIED ANSWERS|| LATEST 2025||
GRADED A+.
database bias? that stop reporting perfor-
mance data are removed
from the database. Since
