
Ultimate access to all questions.
An investment analyst has been appointed to evaluate the risk premiums linked to the illiquidity of different asset classes. The purpose of this evaluation is to prepare an insightful report for the Chief Investment Officer (CIO) of a large university endowment fund, who is considering incorporating illiquid assets into the investment portfolio. Which of the following statements should the analyst accurately include in the report?
A
Corporate bonds that trade less frequently or have larger bid-ask spreads have lower returns than more liquid corporate bonds.
B
Expected returns of illiquid assets can be overstated due to measurement biases.
C
US Treasury instruments are the only assets that do not exhibit illiquidity risk premium.
D
Hedge funds that do not place restrictions on withdrawals exhibit higher returns.