4、Which of the following most accurately describes the liquidity of linear clones of hedge funds and the hedge funds that they are replicating?

I.           Positive first-order autocorrelation is an indicator of illiquidity risk.

II.         Hedge fund linear clones are less liquid than the hedge funds that they replicate.

III.        Larger p-values for the Ljung-Box Q-statistic indicate more statistically significant autocorrelation.

IV.      Larger p-values for the Ljung-Box Q-statistic indicate less statistically significant autocorrelation.

A) I and IV.

B) I, II and III.

C) II and III.

D) I and III.

The correct answer is A

Positive first-order autocorrelation indicates an illiquidity, and the larger p-values indicate less significant measures of autocorrelation (illiquidity).

3s

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