Alpha Forecasts Must Be ____________ to Account for Less-Than-Perfect Forecasting

Multiple Choice

Alpha forecasts must be ____________ to account for less-than-perfect forecasting quality. When alpha forecasts are ____________ to account for forecast imprecision, the resulting portfolio position becomes ____________.

A) shrunk; shrunk; far less moderate
B) shrunk; shrunk; far more moderate
C) grossed up; grossed up; far less moderate
D) grossed up; grossed up; far more moderate
E) None of the options are correct.