systematic risk factors do equally well at explaining the risk and return patterns of public and private assets.”

问题如下：

Which aspect of Zimmermann’s discussion of the traditional approach to asset allocation versus a risk-factor-based approach is least likely correct?

选项：

A.Commingling of assets into asset classes B.Explaining the risk and returns of various assets C.The relative ease of communicating the two approaches

解释：

Solution

B is correct. Zimmermann is incorrect about the ability of risk-factor approaches to explain both public and private asset behavior. Systematic risk-factor approaches typically explain most or all of the risk and return patterns of public assets but far less of those patterns for private assets. This is due to the widespread use of appraisal-based valuation for private assets and the idiosyncratic risks present in individual funds.

A is incorrect. Zimmermann is correct that traditional approaches often commingle assets with very different risk characteristics into the same broad asset classes—for example, when high-yield fixed-income securities and government bonds are both included in a portfolio’s fixed-income allocation.

C is incorrect. Zimmermann is correct that it is easier to explain traditional approaches to asset allocation than to explain risk-based approaches.