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【CFA Level 3】W0 : CFA Level 3 Topics & Game Plan

Background To provide some background, I have passed the first two levels of CFA examination in December 2016 and June 2017, respectively, while on the leave from college. Upon grduation, I obtained the qualification to take Level 3, and hence registered for Level 3 scheduled in June 2020. Due to outbreak of COVID-19, however, CFA Institute made a decision to postpone the examination to December..

Study Note/CFA 2020. 7. 26. 09:42

【Asset Allocation】Diversification

Recap In our first post, we stressed the importance of: 1. Minimizing Loss ($) 2. Minimizing Frequency of Loss 3. Minimizing Volatility To cut to the point, there are three main approaches to achieving these goals: 1. Diversification 2. Asset Allocation 3. Trend Following Strategy 1. Diversification Two Stock Porfolio Let's say, you, investor is only given two options: APPLE stock and cash. APPL..

Study Note/Portfolio Management 2020. 7. 17. 07:29

【Econometrics】Ordinary Least Square (OLS)

The OLS Formula If you choose an option to add a trend line in excel or other programs like Python, SAS or R, they are essentially plotting OLS-dervied coordinates. In this section, I explain in detail what the computer does when it tries to find the line that best fits the data points. The basic idea is very simple. The computer decomposese the actual value of an observation ($Y$) into fitted v..

Study Note/Econometrics 2020. 7. 16. 16:24

【Asset Allocation】Gain-Loss Asymmetry

Gain-Loss Asymmetry Simple arithematic poses two consecutive days with 50% gain and 50% loss, respectively to even out. However, investing runs on a compounding basis. This simple but crucial aspect more often than not exposes investors to so-called "Gain-Loss Asymmetry". This is to say, the percentage gain required to even out the loss is much larger than the percent lost." Proposition 1 Invest..

Study Note/Portfolio Management 2020. 7. 15. 17:11

【Calculus & Algebra】Limits & Derivatives

Basics of Derivatives Derivative: Let $y=f(x)$, then $$f'(x) = \frac{dy}{dx} = lim_{\Delta x \to 0} \frac{f(x+\Delta x) - f(x)}{\Delta x}$$ The Product Rule: If $u=u(x)$ and v=v(x) and their respective derivatives exist, $$\frac{d(uv)}{dx} = u \frac{dv}{dx} + v \frac{du}{dx}, (uv)' = u'v + uv'$$ The quotient rule: $$\frac{d}{dx}(\frac{u}{v}) = \cfrac{(v\frac{du}{dx}-u \frac{dv}{dx})}{v^2}, (\fra..

Study Note/Quantitative Methods 2020. 7. 13. 14:04

【Econometrics】The Fitted Line : Estimation of Beta

The Fitted Line Estimation of $\beta$ It is important at this point to note that the value of our estimates depends on the particular sample we drew from the population (If drawn samples are significantly different from each other, the estimates will be different). Using another sample of $P$ points would have resulted in different estimates values. To make this point clear let's consider an exa..

Study Note/Econometrics 2020. 7. 10. 16:28

【Econometrics】The Fitted Line : Basic Idea

The Fitted Line Basic Idea In practice, we only see the observations plotted in Fig 5. In order to derive the shape of the line that might have generated these points, we can use $P_1$-$P_4$ points to draw a line which is an approximation to the $Y = \beta_1+\beta_{2}X + u$. We write this line as $\hat{Y} = b_1+b_{2}X$, where the hat ("^") represents the fitted variable, lower case $b$'s represe..

Study Note/Econometrics 2020. 7. 10. 15:32

【Econometrics】Data Generating Process

Data Generating Process Suppose that a variable $Y$ is a linear function of another variable $X$, with unkown parameters $\beta_1$ and $\beta_2$ that we wish to estimate, as displayed in Fig. 1. Suppose that we have 4 observations with $X$ values as shown. If the relationship were an exact one, the observations would lie on the straight line and we would have no trouble obtaining accurate estima..

Study Note/Econometrics 2020. 7. 10. 05:41

【Quantitative Methods】Time Value of Money (1)

In our last post, you were introduced to how same "amount of money" can differ in "value" depending on "when" and "how frequently" they are given. This sentence basically covers everything we will be dealing with in the 【Time Value of Money】 series. 【Quantitative Methods】Time Value of Money (0) Three at Dawn or Four at Musk During the Warring States Era, there lived a man who loved taking care o..

Study Note/Journal & Review 2020. 7. 3. 15:54