Which of the following is NOT a quality of an index?

An index is a statistical measure that reflects the performance of a particular group of assets, such as stocks or bonds. The qualities of an effective index include being investable, measurable, and having known identities of the securities it includes.

Being investable means that the index can be replicated with the underlying securities, allowing for investment vehicles such as index funds or exchange-traded funds (ETFs) to be created based on that index. Measurability implies that the performance of the index can be quantified and tracked over time, providing a clear benchmark for assessing investment performance. Having known identities of the securities is vital as it ensures transparency and allows investors to understand which specific assets are involved in the index composition.

In contrast, the characteristic of being highly volatile is not a necessary quality of an index. In fact, a desirable index is often one that represents stable, representative, and diversified underlying securities to provide a reliable benchmark over time. High volatility may be a feature of the individual securities that comprise the index, but it is not a defining quality of the index itself.