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Which of the following statements exhibits a weakness of historical value at risk (VAR)? A. The manager of the Quality Value Fund has a normal distribution of returns and calculates a historical daily VAR of $300. The manager of the Pinnacle Fund has a negatively skewed return distribution and calculates a daily VAR of $360. B. In order to account for instability in the standard deviation of fund returns, the manager of the Spencer Fund uses a decay factor in her VAR calculation. C. The manager of the Matrix Small Cap Index Fund calculates a historical daily VAR at the 95% confidence level of $4,080 using Russell 2000 Index returns from 1987-2001. The manager of the Smith Small Cap Index Fund, which is the same size as the Matrix Small Cap Index Fund, calculates a historical daily VAR at the 95% confidence level of $4,210 using Russell 2000 Index returns from 1990-2001. |