I just got off the phone with a retaking L3 candidate. He thinks that answering 80% of the morning session was okay. No! You can easily complete all of the morning portion of the exam, and that should be your goal. Most candidates fail the exam because they write way too much. Any thoughts from L3 retakers? Thank you. Daren
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L3 Morning "Essay" Exam: Advice for Retakers
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David Hetherington
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Just started today...first section to start out with
Sup,
just signed up.
Which section should i start with????
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prospect theory
“people are risk-averse when there is a moderate to high probability of gains or a low probability of losses; they are risk-seeking when there is a low probability of gains or a high probability of losses. This is consistent with people simultaneously buying lottery tickets and insurance while investing money conservatively.”
Why is that?
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Prospect Theory editing process
The last operation of Prospect Theory editing process:
Detection of Dominance: Outcomes that are strictly dominated are scanned and rejected without further evaluation.
Why outcomes that are strictly dominated have to be removed from further evaluation?
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Joe Boylan Case Scenario -CFA Topic test - private wealth management
Question 3
Which of Boylan’s statements about life annuities is least accurate?
Can someone shed more light on the explanation ? I understood that income yield declines for 50 year old v/s 80 year old but why does it decline compared to not having period certain option ? and why income yield reduces longer she waits to purchase annuity ?
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Reading 7 Practice Problem 5
“I follow a disciplined approach to investing. When a stock has appreciated by 15 percent, I sell it. Also, I sell a stock when its price has declined by 25 percent from my initial purchase price.”
The client of the Statement is most likely behaving consistently with:
prospect theory.
expected utility theory.
behavioral portfolio theory.
The answer is C. But according to behavioral portfolio theory:
“investors reluctant to realize losses may hold higher amounts of cash so that they do not have to meet liquidity needs by selling assets that may be in a loss position. Further, the portfolios of investors reluctant to realize losses may continue to hold some securities not because of the securities’ potential, but rather because of the investor’s aversion to realize losses.”
So, investor will not sell securities that in a loss position based on behavioral portfolio theory. But on the question, investor sells a stock when its price has declined by 25 percent from my initial purchase price. They are different.
And also, why this is not loss aversion based on prospect theory?
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Asset Manager Code of Conduct
WHY?
I’ve never been a fun of the topic of Ethics but I put up with it. But now this AMCC! It’s almost the same, but yet not. I’ve just read it, fell asleep on every page and I had practicly no idea when trying to answer the practice questions. How can this be internalized?
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CFA without Society?
Submitted my work experience and CFAI approves it, then a couple weeks later the local society denies. From reading previous posts my understanding was that you have to join both to get the charter (but can discontinue the society afterwards), so I figure my options were to drop it for now, or resubmit the period that I think is the weak link. But then a couple days later I get the “Congrats you’re approved” email from CFAI and the link to activate… so question is, can you join without the society after all? Or would I just run into issues down the road? Thanks
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What does it mean, "Hedging into each portfolio's base currency"?
HI,
IN Study session 12, Reading 24, practice question no. 27.
The question talks about “hedging into each portfolio’s base currency”
And in the answer to the question:
They provide the following ->
For hedging US, UK, and Mexican bonds into Euros for six months the calculation is:
USD into EUR: (0.15% – 1.40%)/2 = –0.625%
GBP into EUR: (0.15% –0.50%)/2 = –0.175%
MXN into EUR: (0.15% – 7.10%)/2 = –3.475%
Where 6 months Libor for MExico is 7.1%, Euro is 0.15%, UK is 0.5% and US is 1.4%
(Note that a negative number is a cost while a positive number would be a benefit.)
Can someone explain what does “hedging into each portfolio’s base currency”?
Thanks!
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Kaplan New Online Software
Anyone having problems with Kaplan’s new online platform? I signed up for Level III a month ago and have found three “bugs” so far. It’s annoying and a waste of my time. I didn’t pay top dollar to become a beta tester for Kaplan. Here are the “bugs” I have found: 1) Links to some study tasks in the activity feed do not work. Partially sorted by Kaplan’s developers but I still have a link that gives me an error message. 2) On the QBank Progress page i get an incorrect tally for “# of questions answered” (system gives me 1 when i have answered over 200) and “# of incorrect answers” (system gives me 1 when it should read 40 or so). I was told last week by technical support that they have handed my issue over to the developers 3) on the QBank Progess page I do not see all the quizzes taken in my quiz/test history. I only see 16 tests when I have taken more than this. I was told over the weekend that Kaplan would look into this.
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IFT Study Notes
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Should I reread all of the curriculum books or is there a good revision course to use? Retaking the exam
Unfortunately, I’m a 3rd time retaker.
First time, I ran out of time on the AM and bombed that section but did well on PM
Second time, I had the opposite problem in which I did above the average on AM but did worse than average on PM especially ethics
This will be my final try at level 3. What would be the best preparation for this?
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Behavorial Finance questions
Quite an interesting chapter overall !
My question below, about this vague group of words from the book
Copyright, our buds at the CFAI, Book 2 reading 9, 7th verse;
One behavioral theory set out by Shefrin (2008) recognizes the tendency of investors to need downside protection to avoid negatively skewed returns. This investor preference displays excessive risk relative to likely outcomes. Securities that embody significant downside risks in an adverse economic environment, therefore, reflect this risk aversion and offer a premium. An optimal portfolio, taking advantage of behavioral biases, would recognize the extent to which stocks reflect this risk aversion premium, and thus offer returns in excess of true risk. Writing (selling) out-of-the-money put options on securities or indexes would be one way to reflect this risk.
Are they saying that the investors’ need for downside protection is a behavorial quirk, and one can profit from that selling OTM puts (that’s how i read it), or is there a different message?
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Reading 30, Example 14: adding managed futures to the strategic asset allocation
In this example, the correlations of portfolio D with the cta indeed is higher than portfolio A and portfolio C. Then how does it critique Cassano’ s statement that adding managed futures in a portfolio of hedge funds is redundant? It a actually confirms to this statement since the corellations have increawee when managed futures are added to the portfolio as per the information provided in exhibit 33.
Need help in understanding the solution to this question.
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CFA sections name vs. group for L3
As I am about to start studying for L3, I noticed that unlike L1 and L2, CFAI did not explicitly name chapters such as fixed income, equity investments, etc. Can you tell me to which group these chapters belong to? Ethics, Derivatives and AI are all very self explicatory.
Book 1 - Ethics and Behavioral Finance
Book 2 - Private Wealth Management and Institutional Investors
Book 3 - Economic Analysis, Asset Allocation and Fixed-Income Portfolio Management
Book 4 - Equity Portfolio Management, Alternative Investments, Risk Management and Derivatives
Book 5 - Trading, Monitoring and Rebalancing; Performance Evaluation, and Global Investments Performance Standards
Thanks.
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Momentum
What is the logic behind this:
“Momentum can be partly explained by short-term underreaction to relevant information, and longer-term overreaction.”
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Charitable gift estate tax
It says in the curriculum that charitable gifts are not subject to estate tax in some jurisdictions. However, the second term in the formula contains (1-Te). Why is the estate tax reducing the charitable gift if it is not subject to it?
FVcharitable gift= (1 + rg)n + Toi[1 + re (1-tie)]n(1-Te)
Shouldn’t it just be: FVcharitable gift= (1 + r g)n + Toi[1 + re (1-tie)]n ?
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I can't read the CFAI Fixed Income PM book anymore
it’s too confusing- i feel like i’m doing LII derivatives all over again.
can anyone recommend someone who is very good at breaking down these fixed income PM readings (23/24) through videos? Would you go Mark Meldrum in this case?
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Study Notes
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