Wondershare EdrawMind
MindMap Gallery CFA Level 1 November 2022 exam session portfolio management notes
- 42
- 1
CFA Level 1 November 2022 exam session portfolio management notes
CFA Level 1 2022 November exam session portfolio management notes are for your reference. The exam syllabus should change every year. It is recommended that you make a map yourself. It is very useful as notes. I would also like to thank mindmaster for this. Learning provides great convenience.
Edited at 2022-11-16 09:32:38
- cáncer de pulmón
El cáncer de pulmón es un tumor maligno que se origina en la mucosa bronquial o las glándulas de los pulmones. Es uno de los tumores malignos con mayor morbilidad y mortalidad y mayor amenaza para la salud y la vida humana.
- diabetes
La diabetes es una enfermedad crónica con hiperglucemia como signo principal. Es causada principalmente por una disminución en la secreción de insulina causada por una disfunción de las células de los islotes pancreáticos, o porque el cuerpo es insensible a la acción de la insulina (es decir, resistencia a la insulina), o ambas cosas. la glucosa en la sangre es ineficaz para ser utilizada y almacenada.
- sistema digestivo
El sistema digestivo es uno de los nueve sistemas principales del cuerpo humano y es el principal responsable de la ingesta, digestión, absorción y excreción de los alimentos. Consta de dos partes principales: el tracto digestivo y las glándulas digestivas.
CFA Level 1 November 2022 exam session portfolio management notes
- cáncer de pulmón
El cáncer de pulmón es un tumor maligno que se origina en la mucosa bronquial o las glándulas de los pulmones. Es uno de los tumores malignos con mayor morbilidad y mortalidad y mayor amenaza para la salud y la vida humana.
- diabetes
La diabetes es una enfermedad crónica con hiperglucemia como signo principal. Es causada principalmente por una disminución en la secreción de insulina causada por una disfunción de las células de los islotes pancreáticos, o porque el cuerpo es insensible a la acción de la insulina (es decir, resistencia a la insulina), o ambas cosas. la glucosa en la sangre es ineficaz para ser utilizada y almacenada.
- sistema digestivo
El sistema digestivo es uno de los nueve sistemas principales del cuerpo humano y es el principal responsable de la ingesta, digestión, absorción y excreción de los alimentos. Consta de dos partes principales: el tracto digestivo y las glándulas digestivas.
- Recommended to you
- Outline
portfolio management
R48-overview
portfolio perspective
definition
from the perspective risk and return from the perspective of risk and return
Pay more attention to risks
diversification; you don’t have to reduce return, but you can reduce risk
Market turmoil is turbulent, asset correlations increase, and diversification efficiency decreases
portfolio management process
planning step: understand the customer and write it down
analyze the investor's need
objective
constraint limit
develop an IPS
A written IPS communicates a plan for trying to achieve investment success
The stage of shouting the slogan "I want to develop"
execution step: configuration, analysis, combination
asset allocation
top-down/bottom-up
security analysis
portfolio construction
Practical stage
feedback step: monitor, calculate profit and loss and then adjust
monitor and rebalance the portfolio
measure portfolio performance and report
Inspection phase
types of investors and pooled investment products
the types of investment management clients
DC
DB
institutional investors
characteristics of different types of investors
Different investor types
DB
Long investment, high tolerance, low cash flow requirements during the period
bank
Deposit redemption, short-term investment, low tolerance, high liquidity demand, and income to meet interest expenses
Generally, they are the ones with the highest liquidity needs among financial institutions.
endowment and foundation
Permanent existence, long-term investment, high tolerance, low liquidity needs, income to meet the expenditure of the endowment fund
insurance
Low tolerance and high liquidity requirements, generally the second highest liquidity requirement among financial institutions
property insurance
short investment
life insurance
Chief Investment Officer
Pay attention to distinguishing between liquidity demand and income demand. The former is an irregular and large demand, while the latter is a regular and stable demand.
mutual funds and other forms
mutual fund
ETF
…
asset management industry
definition
active vs passive
traditional vs alternative
trend
Passive market share is growing
the amount of data available
robo-advisers
R49-risk and return part I
return and risk
portfolio return
HPR
average return
arithmetic mean
geometric mean
other return measures
gross and net return
pretax nominal return
after-tax nominal return
real return
After-class questions to supplement knowledge points
compound interest
real returns, de-inflation
(1 real income) = (1 nominal interest rate)/(1 inflation)
Risk premium, remove it and lie flat
(1 risk premium) = (1 nominal interest rate)/(1 risk-free interest rate)
leveraged return
TWRR
compound rate of growth
first, calculate HPR, then, compute the annualized
Geometric mean of each HPR: when taking the square root, convert the interval interest rate into an annualized concept
Note that HPR is an interval interest rate at this time, while TWRR is an annualized concept.
MWRR
the IRR based on cash flow
first, determine the timing of each cash flow
then, compute IRR or geometric mean
TWRR vs MWRR
both are annual rates
TWRR is not affected by cash flow
portfolio risk and return
In a long-term efficient market, it is impossible to obtain higher returns without accepting high risks.
Liquidity should be considered, especially when investing in emerging markets and in infrequently traded securities
a single asset 10-12
expected return
variance of return
sample variance of return
standard deviation of return
two asset portfolio 11-12
covariance of return
correlation of return
variance of return for the portfolio
portfolio risk
the lower correlation, all else equal, the greater the diversification benefits
There are some differences from ρ in quantities: Among the quantities, the smaller the absolute value of ρ, that is, the closer it is to 0, the lower the correlation; In the combination, it depends on the numerical value (that is, the sign). The smaller the value, the better the dispersion effect.
variance of N-asset portfolio 12-12
modern portfolio theory
the Markowitz assumption
return distribution
risk is variability
risk/return
risk aversion
utility maximizationutility maximization
modern portfolio theory
Markowitz assumption
minimum-variance portfolio: Given the expected return, it has the minimum variance; given the risk, it has the maximum expected return.
minimum-variance frontier
global minimum-variance portfolio
left tangent point
efficient frontier
risky asset
Risks have been fully dispersed
type of investor
utility theory
Assumptions: risk aversion, always prefer high returns to low returns, be able to rank
formula
subtopic
A
Risk aversion coefficient A>0, the higher the risk σ, the lower the utility, the more risk-averse, the lower the risk tolerance, the higher the required return
Risk neutral A=0
Risk seek preference A<0, the higher the risk tolerance
indifference curve indifference curve
The larger A is, the steeper the curve is, indicating that customers are risk averse and will require greater returns in the face of high risks.
Variation of the utility theory formula, E=½Aσ² U
R50-risk and return part II
CAL capital allocation line: risk-free and risky portfolios, capital allocation
capital allocation line: risky asset and risk free asset
portfolio return
subtopic
Combined standard deviation
subtopic
optimal CAL: rotate to the optimal position, which is tangent
The tangent between CAL and the efficient frontier
optimal risky portfolio is the cut-off point
The intersection between CAL and the efficient frontier
The intersection of two objective
The risk free asset weight is exactly 0
well-diversified
CAL is objective and EF is objective and has nothing to do with investor subjectivity.
two-fund separation theorem
All investors will choose a combination of a risk-free asset and an optimal portfolio of risky assets
That is, the point on the optimal CAL line formed by the risk-free asset and the optimal risky asset portfolio.
optimal portfolio
The tangent point between optimal CAL and IC
involving the intersection of subjectivity
As long as it does not overlap with the optimal risky portfolio, it contains risk-free assets.
Depends on risk preference: the higher A, the greater the convexity of IC, the lower the risk tolerance, the closer the cut point is to risk-free assets, and the lower the risk and return of the portfolio
mean-variance theory refers to the above conclusions
Capital Market Line CML: homogeneity of expectation
There is only one CML and countless CALs. Assuming that everyone has the same expectations, there is only one effective frontier, so there is only one tangent line. This special CAL is CML.
According to the above assumption, the optimal risky portfolio becomes unique and is called market portfolio. Everyone likes it, so it is called market portfolio.
The intersection between CML and EF
Does not include risk-free assets
fully dispersed
formula
subtopic
y=kx b
Passive investment strategy
It only includes risk-free assets and market portfolios (equivalent to the market index), so it is a passive investment and passive strategy.
Lending A: To the left of point M, close to risk-free assets, it is equivalent to increasing the proportion of risk-free assets (lending money to the bank lend), and investing part of it in risky assets (the proportion is equal to risky assets σ ÷ market σ)
borrowing B: To the right of point M, stay away from risk-free assets, the income and risk will become larger, borrowing money to invest in risky assets accounts for more than 100%, borrowing money to invest in risky assets with leverage, portfolio σ > market σ
Leverage = investment amount ÷ own funds
systematic and nonsystematic risk
only systematic risk is compensated
Systemic risks cannot be diversified through portfolios, so they need to be compensated; macro risks, for example, have an impact on various financial products and cannot be diversified through investments.
Unsystematic risk: can be reduced through diversification
beta: a measure of systemic risk
Through regression, the excess return of the individual portfolio is on the vertical axis, and the excess return of the market portfolio is on the horizontal axis.
β is the slope of the SCL security characteristic line
The horizontal axis is the market excess return, and the vertical axis is the portfolio excess return.
formula
subtopic
In essence, it can also be regarded as the income of a single entity ÷ the income of the market (risk-free income is a constant)
When the market σ changes by 1, how much does a single portfolio σ change? The correlation coefficient ρ must be considered.
The β of the portfolio can also be calculated using the weighted average, the weight of each asset × the corresponding β; among them, the β of the risk-free asset is 0, and the β of the market portfolio is 1.
CAMP
William Sharpe Hypothesis
homogeneous expectation
risk-averse utility-maximizing
frictionless markets are perfectly frictionless
single holding periodsame holding period
infinitely divisible infinitely divisible, can buy 0.001 shares
Investors can invest in any asset they want
price takers
Investors cannot influence market prices
SML
security market line
Slope: market risk premium
The connection between risk-free assets and market portfolio
formula
subtopic
CAPM
SML is the image of CAPM
The expectation of a single portfolio is on the vertical axis, and β systematic risk is on the horizontal axis.
Application: It can be seen that the CAMP coordinate system represents the true intrinsic value of the enterprise.
At the point above the line, the same risk has higher returns (actually more profitable), the market interest rate is greater than the return (intrinsic value) on SML, it is undervalued and should be bought
Points below the line, market interest rates are less than r on SML, overvalued, sell
The point falling on the line is equal to, then it is properly valued. Fair pricing = intrinsic value.
other return generating models
single factor model
single-index model
Ri-Rf=α β×(Rm-Rf), regression with excess return
market model
Rm, directly use Rm to regress, the slope is the coefficient β of Rm, and the intercept is α
only factor is the expected excess return on the market portfolio
multifactor model
macroeconomic factor
Related to macroeconomics: GDP r inflation rate productivity employment
fundamental factor
Related to financial data: earning, earning growth, firm size, research expenditure
statistical factor
It doesn’t necessarily have economic implications, but it does have statistical implications.
performance evaluation indicators
Form 11-12
sharpe ratio and M²α, total risk, not fully diversified
M²α=portfolio premium×σ market/σ portfolio-market premium
subtopic
The difference in market premium
Treynor ratio and Jensen's Alpha, systemic risk beta, fully diversified
Treynor's formula: how much premium does a beta have?
It is very similar to the Sharpe ratio, because Sharpe considers total risk, so the denominator uses σ, and Treynor only considers systematic risk, so the denominator is replaced by β.
Jensen's formula: α = actual income - income calculated by CAMP
subtopic
R51-basic of portfolio planning and construction
components of IPS ,risk and return
the need for a policy statement
understand and articulate realistic investor's goal, need and risk tolerance
ensure that goals are realistic
provide an objective measure of portfolio performance
major components of IPS
introduction
statement of purpose
statement of duty and responsibility
procedure: the step taken to keep the IPS updated in a timely manner and respond to various situations
investment objective
risk
risk tolerance
willingness
ability
As long as one of them is lower than the average, the whole is low.
return
absolute basis
relative basis
peer group
investment constraint
RRTTLLU, only risk and return are goals, everything else is a limitation
time horizon
tax concern impact
liquidity
legal and regulatory facors
unique circumstances special circumstances
investment guideline
Regarding how to implement it, such as whether leverage and derivatives can be used, special asset classes
evaluation and review
appendiceAppendix: Except for these two, everything else is the main text
strategic asset allocation
rebalancing policy
investment constraints, asset allocation, ESG
investment constraint
liquidity
time horizon
tax concern
legal and regulatory factors
unique circumstances special circumstances
T T L L U
strategic asset allocation
long-term objective
correlation within the class > correlation between asset class
tactical asset allocation
ESG
ESG integration
negative screening
positive screening (best-in-class)
thematic investing
engagement/active ownershipShareholder engagement to achieve ESG goals
R52-behavioral biases of individuals
basics of behavioral finance
categories of behavioral biases
cognitive errorscognitive errors It’s just that the ability is not good, you can correct it by studying hard
belief persistence
Representativeness bisa represents the stereotype bias, good company = good investment? Use past rules to predict the future
Ask yourself: Does the past predict or predict the future?
illusion of control bias, thinking that one can control
seek contrary viewpoint and keep record Find your own account
Confirmation bias labeling, come to a conclusion first, and then look for evidence, typical formalism puts the cart before the horse.
Challenge your own conclusions
conservatism bias is overly conservative, previous view, slow to update
If there is no new information, then find new information
hindsight bias/hindsight bias
Check your own records and see what the records say
RICCH
processing error
anchoring & adjustment anchoring, just see the first two in a bunch of numbers
Ask yourself: Are these two data what I want?
mental accounting bias
Focus less on individual accounts and focus on total return
framing bias
Repeated defeats and battles
Availability bias is lazy and focuses more on easily accessible information.
Investigate carefully, analyze before making decisions, and focus on long-term results
FAMA
emotional biasesemotional biases It's easy to change a country, but it's hard to change one's nature, so we call them losers.
harder to correct
loss aversion bias makes losing money more painful
overconfidence bias
Look at past record 0-5
self-control bias
status quo bias is content with the status quo, does not want to change, and will not change even if it can be done
Endowment bias Endowment bias, what you have is the best
Ask yourself: If I want to buy this underlying asset now, should I still buy it?
Regret-aversion bias avoids making decisions due to fear of regret, resulting in conservatism due to poor investment results in the past; herding effect
These three are very similar: Be content with the status quo, lazy Have good, lazy Afraid of regret, lazy
LOSERS
Things that will lead to under-diversification include: overconfidence bias, illusion of control, confirmation bias
anomalies
momentum
bubbles and crashes
value and growth
R53-introduction to risk management
define risk management
basic concept
risk
risk exposure
risk management
not about minimizing risk The goal of risk management is not to minimize risk, but to maximize utility
framework
risk governance
top-level foundation, a top-down process, usually completed by management
risk identification and measurement
quantitative and qualitative The main part of quantitative analysis, but there is also qualitative analysis
risk infrastructure infrastructure
resource and system grassroots management personnel and systems, the main purpose: tracking risk exposure, quantitative analysis, assessment status, anyway, it is work, including identification, measurement and monitoring
policy and process
are management's complement to risk governance at the operating level. If managers supplement their own ideas, they can be implemented.
risk monitoring, mitigation, and management
If it is found that the actual exposure is inconsistent with the affordability, action should be taken to restore consistency. Both monitor and level
communication
feedbackcommunication feedback
strategic analysisrointegration
Finally, we will close the gap and integrate it, and then feed back to the company to improve outcomes.
The management has an idea; then the grassroots begin to analyze, identify, measure, and build a basic platform; the management inspects and makes supplements, and then it can be fully implemented; monitoring and leveling during execution, if there are any problems, correct them quickly; communicate with various departments for feedback Perfect; tend to perfection, summarize, and feed back to the company.
For the entire enterprise, the correct sequence is
risk tolerance
Depend on how much you can bear: what you cannot accept and what is the maximum level of loss.
unacceptable risks
worst losses that may be tolerated
The main benefit of risk budgeting is to force a risk tradeoff, leading to the choice of the decision with the highest reward per unit of risk.
It depends on how much you can bear and how much you can configure.
Keywords allocat
Quantitative indicators will also be used
keywordquantify
risk exposure
types of risk, measure and modify risk
type
financial risk
market risk
Risks caused by price fluctuations in various financial markets, stock prices and rates, exchange rates
credit risk
breach of contract
liquidity risk
The level of trading activity and the inability to realize cash in a timely manner
non-financial risk
operational risk
An example: cyber risk computer/network risk
solvency risk
measure (both are measured by absolute value)
value at risk (VaR value at risk)
The minimum loss under small probability, the right boundary on the left, so it is the minimum loss The maximum loss under high probability, the left boundary on the right, so it is the maximum loss
$100 at 1% for one day, there is a 1% chance of losing at least 100 yuan
conditional VaR
Since VaR does not consider the larger loss to the left of the boundary value, CVaR is introduced to weight average all losses exceeding VaR.
Sortino ratio
(portfolio return - minimum required return)/half standard deviation
Half standard deviation also measures tail risk (downside risk)
modification
High frequency and high loss
prevention and avoidanceRisk avoidance: give up directly
Low frequency and high loss
transfer risk transfer: insurance, deductible means self-insurance is required
Low frequency and low loss
Accept risk retention: prepare more money yourself, or diversify it
High frequency and low loss: import and export trade
shifting risk to counterparty: derivative
R54-technical analysis
basics of technical analysis
Core basis: price and volume
underlying logic: supply and demand, past price action can be used to anticipate
charts
line chart
bar chart
candlestick chart
Hollow box: high closing price
Solid box: high opening price
price and volume
confirmation verification, heavy volume increase
divergence, shrinkage and rise
scales
linear scale/arithmetic scale
Short-term use, equal changes
logarithmic scalelogarithmic scale/scale
Long-term use, percentage change
trends and patterns
trend line
uptrend line: connecting the low of the price chart
downtrend line: connecting the high of the price chart
A previous uptrend price breaks out of its consolidation range on the upside, signaling that price will enter a new uptrend and vice versa.
support level and resistance level
reversal pattern
head-and-shoulders pattern
price target=neckline-(head-neckline)
Reverse head and shoulders: price target=neck (neck-head)
double top double head
triple topthree heads
Double bottom double bottom
continuation patterncontinuation pattern/consolidation pattern
Also called healthy correction
trianglestriangle
price target=breakout level width
rectangleless rectangle
flags and pennants
indicators
price based
moving average line
simple moving average arithmetic average
exponential moving averageweighted average
trading strategies
first, price in above or below its moving average
second, the distance between the moving-average line and price is significant
third, crossover of MAs are important
Cross upward, bullish, golden cross
Cross downward, bearish, dead cross
bollinger band
Definition: moving average ± a set nember of σ
Trading strategy: When reaching the upper and lower boundaries, it may stay within the band for a correction, it may break through a huge level and buy, or it may fall below and sell with a stop loss.
narrowing band: volatility falls to a very low level
Also called squeeze
momentum oscillators kinetic energy oscillators
rate of change oscillator (ROC)
closing price growth rate
just
burden
relative strength index (RSI)
Proportion of rising days x/(x y)*100
Above 70/80, overbought market, down signal
Below 30, oversold is an oversold market, a bullish signal
stochastic oscillator random oscillation
formula
Strategy
moving average convergence/divergence (MACD)
sentiment indicator
put/call ratio
A high put/call ratio usually indicates a bearish market
If it is too high, it may be an upward signal.
volatility index
For example, the volatility of the S&P 500 represents the fear index.
margin debt
One day, the credit will be used up
application to portfolio management
Inter-market analysis: Help investors grasp market rotations by analyzing how major asset classes interact with each other. It is widely used to compare the relative performance of securities markets in different industries or countries.
R55-fintech in investment management
what is fintech
analysis of large datasets
traditional data source
non-traditional data source
social media sensor sensor networks
analytical tools
artificial intelligence (AI)
automated trading
automated advice
financial record keeping: such as distributed ledger technology (DLT) distributed ledger technology
big data
The 3Vs of big data: volume, velocity, and variety
Three main sources of alternative data: individuals, business, and sensors
Classification
traditional
structure
non-traditional(alternative)
semi-structure: such as web page language
non-structure: video, WeChat, blog
three sources
individuals
business processes
sensorssensors
challenge
artificial intelligence and machine learning
machine learning (ML)
The data is divided into two parts: the training dataset is used for modeling, and the validation dataset is used for testing.
error
overfitting
ML models treat noise in the data as real parameters (which should not be calculated in the model)
underfitted
black box
type
Supervised learning has supervised learning, label it first
unsupervised learning unsupervised learning, no labels, classification by yourself
fintech in investment management
text analytics text analysis: For unstructured and non-standardized data, covering public data and private data, it is used to predict future trends, including the economy, stocks, and sales trends affected by investor and consumer sentiment.
robo-advisers services
advantage
Use a passive, fair, and conservative investment approach
Low threshold and low fees
Target customer base expanded
shortcoming
not always transparent
complexity
fintech in Distributed Ledger Technology
Classification
permissionless network does not require permission: open to any user
permissioned network requires permission
application
crytocurrency cryptocurrency, digital currency digital currency
Tokenization token: represents ownership right to physical asset and is most related to physical assets. It represents the ownership of physical assets, so it is called a token.
smart contract: post-trade clearing and settlement delivery and settlement at the end of the investment
compliance
Pay attention to the distinction