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　　The measurement error in VaR due to sampling variation should be greater with which of the following statements：
　　A.     More observations and a low confidence level (e.g. 95%)
　　B.     Fewer observations and a high confidence level
　　C.     More observations and a high confidence level (e.g. 99%)
　　D.     Fewer observations and a low confidence level
　　Answer: B
　　Sampling variability (or imprecision) increases with: (i) fewer observations and (ii) higher confidence levels. To show (i), we can refer to the formula for the precision of the sample mean, which varies inversely with the square root of the number of data points. A similar reasoning applies to (ii). A higher confidence level involves fewer observations in the left tails, from which VaR is computed.