Hedge funds can sometimes present a misleading image by appearing to have a low level of systematic risk. What would be an appropriate method from the options provided to correct this perception?

Exam-Like

Account for negative serial correlation of returns by first differencing the data when extrapolating risk to longer time horizons.

14.3%

Account for positive serial correlation of returns by aggregating the data.

17.1%

Use regressions with fewer lags of the market factors and sum the coefficients across lags.

11.4%

Use regressions with additional lags of the market factors and sum the coefficients across lags.

57.1%

Financial Risk Manager Part 2