What can invalidate a reported rate of return related to data quality?

The validity of a reported rate of return is significantly influenced by the quality of the data used to calculate that return. Illiquid and infrequently priced assets can lead to substantial issues in this regard. These assets might not have reliable market prices available on a consistent basis, resulting in a greater likelihood of stale pricing or mispricing during the calculation period.

When assets are infrequently priced, the last available price might not reflect the true market value, especially in times of market volatility, which can skew the reported rate of return. This misrepresentation can mislead investors regarding the actual performance and risk associated with the asset. Consequently, the lack of transparency and the potential for price adjustments when a transaction does occur can invalidate the accuracy of the reported returns for such assets.

Conversely, high market cap assets tend to be traded more frequently and therefore have more reliable pricing data. Liquid and frequently priced assets provide a better reflection of the current market conditions, thus yielding a more accurate reported rate of return. Completely cash-equivalent assets, while they may offer stable returns, do not present issues related to data quality in the same way as illiquid assets do. Therefore, it's the illiquidity and infrequency of pricing that raise concerns about the validity of reported returns