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A worldwide survey conducted by the CFA Institute in April 2020 showed that the highest share of respondents expects a hockey-stick shaped recovery. This implies some form of stagnation over two-three years before a steady pickup is seen, the report said.

The survey also showed an expectation of asset mispricing due to the crisis. Asset mispricing is a deviation of the price of an asset from fundamentals (for example, a bubble in the stock market).

For the financial services industry, the largest share of respondents expected widespread bankruptcies and unethical behaviour in the investment management industry, stemming from the crisis. The survey was conducted during 14-24 April and polled 13,278 members of the CFA Institute across the world.

CFA Institute members tend to work predominantly in the financial services industry, particularly in investment or asset management and financial planning.

Only 10% of the survey respondents expected a quick ‘V-shaped’ recovery in the global economy, while 44% favoured a medium-term hockey-shaped recovery, which would take two-three years. This indicates a stagnant economy before a steady upward trend, said the survey.

Another 35% favoured an even slower ‘U-shaped’ recovery, which would take three-five years. In this type of recovery, there is a slow pick up after reaching the bottom followed by an acceleration phase.

In what may be positive news for active asset allocators, an overwhelming majority (96%) said that the crisis increased the chance of asset mispricing. This allows investors to earn higher returns by switching between over and underpriced assets. Respondents gave liquidity dislocation and distortion caused by government intervention as the two most likely sources of mispricing.

However, 45% of respondents also said that the crisis increased the chances of unethical behaviour in the investment management industry. Irrational decisions in the face of incomplete information give opportunities for unethical behavior and this gets exacerbated in times of crisis, the survey said. In terms of the long-term impact on the financial services industry, respondents cited large-scale bankruptcies, automation and consolidation of firms as the top three effects.

"India was the fourth-largest source of survey respondents. We got a lot of responses from CFA Institute members in India. By and large, the answers for India are close to the global averages," said Vidhu Shekar, country head—India, CFA Institute.

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