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Level III
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Capital Market Expectations
Capital Market Expectations
Easy
An analyst notes that a specific macro variable has strong predictive power for equity returns but cannot provide any economic rationale for the relationship. According to the CFA curriculum's guidance, the analyst should most likely:
A
Exclude the variable from the forecasting model despite its statistical significance
B
Include the variable because statistical significance is the ultimate criterion
C
Include the variable but assign it a lower weight than economically justified variables
D
Conduct additional statistical tests to confirm the significance before deciding
Select an answer to continue
Tags
#economic-rationale
#data-mining-bias
#variable-selection
#no-story-no-future
#analyst-biases
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