in the CAIA text book. pg 639 of the current and intergrated topics question # 5 the questions answer is D, but how can that be. this is completely different from what i read in schweser. can someone advise me if the answer in right in the caia text book or maybe the question meant to say most likey instead of least likely thanks
what’s the question - i don’t have the book
which of the following is least likely to be correct regarding the expression correlation go to 1. and the answer has been provided as " the expression has been used to describe the phenomenon that aseets become hight correlation during extreme events. should this answer be right if the question says most likely? but they have used the term least likely.
Sounds like a mistake in the book; check for errata online. Asset classes that are “normally” diversifying (i.e. uncorrelated or less correlated) do tend to become more correlated (closer to +1) during periods of market stress.
thats the thing the errata for that questions is not there thanks mate
yeah a general rule of thumb is that correlations tend to 1 in times of stress, so it looks wrong
Yes, this question appears like it may be incorrect.