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1、2014 年年 CFA III 必背知识点必背知识点 SS 11、12 Equity 1. 3 types of approaches vs. beliefs concerning market efficiency PassiveActiveSemi-active Market is efficient; Research will not provide sufficient return to cover cost. Inefficient market; Research will lead to outperform the market net of all costs Betwe
2、en; Extract information not embedded in stock prices; In doing that with limited tracking risks.2. Approaches to construct an index portfolio i. (1) Full replication; a. It is more appropriate for: i. smaller indices (less than 1,000 stocks); ii. when the index stocks are liquid; iii. and when the m
3、anager has more funds to invest. b. The advantage i. low tracking risk and ii. the portfolio only needs to be rebalanced when the index stocks change or pay dividends. If the replication is based on value-weighted index, it will be self-rebalanced. ii. (2) Stratified sampling; a. Stratified sampling
4、 is more appropriate when: i. the number of stocks in the index is large; or ii. the stocks are illiquid. b. Can be used to mimic the performance of concentrated position within an index without taking the actual concentrated positions. iii. (3) Optimization. a. Drawbacks: i. Imperfectly specified:
5、it accounts for the covariances between the risk factors but the risk sensitivities may change through time or optimization procedure. ii. It may also provide misleading model just reflect sampling error. iii. lead to frequent rebalancing. b. An optimization approach, however, leads to lower trackin
6、g risk than stratified sampling. 3. Style i. Value investment style a. Value investors focus on low price multiple stocks because they believe that earnings will revert upward or that these stocks are safer than expensive growth stocks. b. A value investor must realize that there may be a good reaso
7、n why the stock is priced so cheaply and have an understanding of how and when the stock might recover. c. The main risk for value investors is that the perceived undervaluation will not be corrected within the investors investment time horizon. d. The sub styles are: i. High Dividend Yield. ii. Low
8、 P/E or P/B; iii. Contrarian; ii. Growth investment style a. Growth investors focus on stocks with high expected earnings growth. b. The risk for growth investors is that earnings growth does not materialize and the price-multiple falls. c. Sub styles are: i. Consistent growth; Earning momentum (les
9、s sustainable). iii. (3) Market-oriented investment style (blend or core style) a. Market-oriented investors have portfolios that resemble a broad market average over time and may switch between value and growth. b. A market-oriented investor must outperform a broad market index or investors will us
10、e lower cost indexing strategies. c. Market-oriented style investors might buy a stock with a high P/E provided the price can be justified through future growth expected in EPS. They might also buy a depressed cyclical issue provided that they foresee some recovery in product pricing in the future.
11、d. Sub styles are: i. Market-oriented with a value bias; ii. Market-oriented with a growth bias; iii. Growth at a reasonable price (GARP); iv. Style Rotators. 4. Equity style analysis - Comparison of 2 techniques AdvantagesDisadvantagesReturn- based Characterizes entire portfolio Facilitates compari
12、sons of portfolios Aggregates the effect of the investment process Different models usually give broadly similar results and portfolio characterizations Clear theoretical basis for portfolio categorization Requires minimal information Can be executed quickly Cost effective May be ineffective in char
13、acterizing current style Error in specifying indices in the model may lead to inaccurate conclusionsHolding -based Characterizes each position Facilitates comparisons of individual positions In looking at present, may capture changes in style more quickly than returns-based analysis Does not reflect
14、 the way many portfolio managers approach security selection Requires specification of classification attributes for style; different specifications may give different results More data intensive than returns-based analysis5. The reasons for inefficient pricing on the short side of equity trades are: i. the impediments to short sales; ii. management is more likely to promote the firms stock; iii. analysts are more likely to issue buy recommendations than sell recommendations; iv. and the pressure analysts face from management against issuing sell recommendations.
