Some common CFAI tricks

Tactics wrote:
This is no trick, but I’ll likely soil my pants if I see a 12 point question on inter-market carry trade in the AM.
Some tricks:
1. Throwing in an illiquidity constraint in Singer Terhaar
2. Availability bias vs representativeness bias
3. The old “so do I add inflation or not?” in ind IPS
4. Providing weekly mean/sd and asking for annual VaR
5. IVaR vs MVaR (IVaR is for new, MVaR is for addition to existing)
6. Any Ethics question that requires distinguishing between requirement and recommended
7. The nitty-gritties in GIPS (like no need to report # of portfolios if <5)
8. Not using forward earnings yield in Fed/Yardeni
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12 points on inter market carry trade ? Come on the world ain’t that bad.
 
mfedrizzi wrote:
Can you expand on 1 - 3?
For 1. I don’t believe you include a illiquid constraint in Singer Terhaar
For 3. Inflation is added only if the factors in the material do not consider inflation?
Just want to make sure I don’t mess these key points up on exam day
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Point 3 : Singer-Terhaar includes illiquidity premium when calculating ERP for Emerging/Developing country.
 
CEO10K-DAY wrote:
Please double check your point 8 - every question I’ve done I have always used the forward earnings yield.
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That’s what I meant. Not using the forward yield is the mistake.
 
Tactics wrote:
CEO10K-DAY wrote:
Please double check your point 8 - every question I’ve done I have always used the forward earnings yield.
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That’s what I meant. Not using the forward yield is the mistake.
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haha okay. I read that the opposite way.
 
CEO10K-DAY wrote:
Please double check your point 8 - every question I’ve done I have always used the forward earnings yield.
Click to expand...
I just confirmed with the text, it is FEY for both Fed and Yardeni. Vol 3 Pg 151
 
Private Wealth: They give a description of tax regime in the country at the very beginning of the case (let’s say Heavy Dividend or something else) which implicitly gives you FLAT or PROGRESSIVE taxes. Later they can ask what is more efficient: tax exempt or tax defferred account. If regime is flat then there’s no difference.
 
AndreevM wrote:
Private Wealth: They give a description of tax regime in the country at the very beginning of the case (let’s say Heavy Dividend or something else) which implicitly gives you FLAT or PROGRESSIVE taxes. Later they can ask what is more efficient: tax exempt or tax defferred account. If regime is flat then there’s no difference.
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did not notice this in any of the cfa am i did. where did you see this?
 
Maybe it’s just me but picking the right number of forward points when calculating the forward rate has thrown me a few times
 
Forward Earnings Yield. IE E1 / P0.
E1 on the formula sheet represents its the forward earning yield. Correct?
 
Sorry. I don’t mean to ask a dumb question here but triple confirming.
(Degree of Integration) X (ST Dev - i) X (correlation - i, m) X (Sharpe m) + (Degree of Segmentation) X (St Dev) X (Sharpe - m)
Then you add the illiquid Premium on top of ERPi?
Fully understand the second part of the response regarding inflation. Thanks for the help & confirmation
 
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