Was doing the Kohler topic test and got a little confused on question 3.
The problem states that a portfolio is Larg Cap, Mid Cap, and Small Caps, Agricultural Commodity Index, All Commodity Index, and Municipal Bonds
The question ask the advisor would most likely criticize the specification of which asset class?
The answer was Mid Caps because they are not mutually exclusive with respect to domestic large-cap and small-cap equities.
However, page CFAI Vol 3 pg. 195 specifically states that typical asset classes including domestic equity, and that Market Cap has sometimes has been used as a criterion to distinguish Large Cap, Mid Cap, and Small Cap.
Further I was thinking that the All Commodity Index and the Agricultural Commodity index may not be mutually exclusive because Agri would contained with the All Commodity Index.
I have trouble every time the Institute ********* candidates with such pointless academic discussions: putting an asset in a category, defining investor as an adventurer or individual ************, deciding whether firing a good manager is a type two error…
Hmm. I want to fire John and I am not sure what type this is. This calls for immediate board discussion.
Hahaha, took today this one and the only missed question was this one. I marked All commodity index as not well specified. Also guidance answer was not of any help.
Haha sometimes I think CFA does this intentionally to confuse people to suck another round of annual fees. It is of course in their interest to have more people fail than pass.
Glad to see we are both thinking about it the same way.
So, yeah, probably not the greatest question. I guess the author was trying to get us to also look at it by evaluating the correlations. The correlation between the All Commodities Index and the Agricultural Commodities Index is modest at 0.553, while the correlations between Mid Caps and their Large and Small Cap counterparts are quite high.
For what it’s worth I got this one wrong too, twice, on separate passes through the questions a month apart.
