Chartered Alternative Investment Analyst Association (CAIA) Practice Exam

Which of the following methods is NOT a major method of analysis for alternative investments?

1. Statistical Methods

2. Return Computation Methods

3. Market Timing Methods

4. Valuation Methods

The correct answer is: Market Timing Methods

Market timing methods do not qualify as a major method of analysis for alternative investments because they focus primarily on predicting market movements to optimize the timing of buying and selling assets, rather than providing a systematic framework for evaluating the fundamental characteristics or inherent value of alternative investments. In contrast, statistical methods analyze historical data to identify trends, return computation methods assess the performance of investments to understand their risk and return profile, and valuation methods estimate the intrinsic value of an asset to make informed investment decisions. These approaches are foundational to understanding and analyzing alternative investments, making market timing methods less aligned with the primary analytical frameworks used in this field.