Equity - Blume method beta calc

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chowder's picture

wtf is Blume method?

Reason #2: No Expiration Date. You get free updates until you pass.
supersharpshooter's picture

i figured it was 2/3(beta) + 1/3

one of the distractors was 0.5(beta) + 0.5

topher's picture

I didn’t know what Blume was either, but they asked for adjusted beta which is:

(2/3)Beta + 1/3*1 = 1.27

bpdulog's picture

I don’t know but this is what I did:

2/3* provided beta + .33

I think I read that in the Secret Sauce

NO EXCUSES

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sebrock's picture

I used 50% historic beta, 50% 1 but I think that this is the wrong proportions.

golfer's picture

the only formula I could remember is the 2/3 + 1/3 beta

Semper Augustus's picture

^^^That’s what i did.

fbc203's picture

Semper Augustus Wrote:
——————————————————-
> ^^^That’s what i did.

Blume’s Adjustment:

(2/3) Beta + (1/3)

Source: http://www.ena.asn.au/udocs/ena_051705_165248.pdf

_________
Forza Juve

sidd's picture

one of the questions whose answer I was pretty confident abt

jogaut's picture

Wow! I blew that question. All I could think of was who the hell is this Blume Mofo?

adavydov7's picture

I answered 1.27, but to get that exact number you have to have b0=.325 not 1/3 kinda threw me at first so I was like WTF so I set up the equation with each answer choice as the solution to figure out what b0 and 1-b1 was for each choice (answer choice b had b0=.5, and a had something like b0=.1325 or something).

f2d's picture

The answer was 1.27?

Wow, I got that right.

I used my calculator’s random # function, it came up as like .9 so i put down C, lol (0 - .33 = A, .33 - 67 = B, .67 - 1 = C)

kevincwang's picture

yeah, I used 1/3. 2/3 and don’t know what’s the hell of Blume

I think if I get it wrong, most of people would use the same anyway

answer I remember is 1.26666 ,so 1.27

Lurky's picture

Blume was the first one to write papers about the mean reversion of beta and came up with the adjusted beta. So 0.33 + 0.67 * beta was Blume’s method.

I wrote a paper about this at University so it immediately was clear to me but it was only one line in Schweser (about Blume) so it’s logical few did. I would as well if it weren’t for that paper (and my thesis which was all about beta!).

kevincwang's picture

Lurky, thanks to verify for us, another question in the pocket:D

you should write in the exam paper” I own this method:D”

Lurky's picture

kevincwang Wrote:
——————————————————-
> Lurky, thanks to verify for us, another question
> in the pocket:D
>
> you should write in the exam paper” I own this
> method:D”

If only I owned the exam. I was very confident coming out. Gave away some easy questions in the AM because I rushed through (was done in less than 1.5 hours) and realized later I did some things wrong as a result. In the PM I took my time and did rather well. Now reading the forum I see I missed a lot of things regarding the questions. So I gave the correct answers to the wrong question because of misinterpretations or just overlooking things. Seriously frustrating! CFA: Just come up with questions that are difficult to answer instead of difficult questions. There is a difference…

Ah well, all depends on the MPS now. The questions cost me 10% in score.

kevincwang's picture

that always happens but if you feel confident coming outside, most likely you had it.

I missed PVGO in the morning, was so confused whether to use E1 and E0 and trying to be a a smart ass to challenge the formula I remembered:D

again 70 to pass and it is all good

Lurky's picture

I was confident based on the questions I was sure I had right. Not funny when a lot of them appear to be wrong after all.

Ah well. Let’s forget and await the 18th of August!

kevincwang's picture

yeah, 3 months happy time at least:D

alimesoda's picture

1

MarshallB's picture

chowder Wrote:
——————————————————-
> wtf is Blume method?

Is Blume in the CFAI curriculum? Not in the index, and at a quick scan on beta stuff, can’t find it.

barthezz's picture

MarshallB Wrote:
——————————————————-
> chowder Wrote:
> ————————————————–
> —–
> > wtf is Blume method?
>
> Is Blume in the CFAI curriculum? Not in the index,
> and at a quick scan on beta stuff, can’t find it.

LOS 36d

barthezz

L2lifer's picture

one of the distractor answers included using the incorrect formula of 2/3+1/3*(beta)… which I unfortunately used because I couldn’t remeber which order was right.

HydrogenRainbow's picture

i got stunned when they said BLUME method of calculating beta. I was like “what the hell is that??” But i figured that they should be referrign to the adjusted beta so yeah…..0.6667(raw beta)+0.333

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