How is Treynor-Black tested in previous exams?

Do they give you the alphas, betas, residual errors, etc, and expect you to calculate weight of the active portfilio and weight of the index? Plus may be the sharpe ratio of the overall portfolio? In other words, are you expected to calculate any of the needed data for the model, or just use the final equations, like sharpe ratio and weights?

the search button on this site is a very powerful tool. http://www.analystforum.com/phorums/read.php?12,568677,569153#msg-569153 it got tested in 2007, so head towards june of that year and you should find your answer.

Thanks bannisja, my question is how it is tested, not how it works, I got that finally. I guess I’ll wait till I get to the mocks.

I did L2 in 08 and I learned T-B inside out because apparently there was a whole item set on it in 07. So I built models and understood it from every angle, every step in the process, every calc. Anyway 08 exam had NOTHING on it! So 09 could be the year again. Judging by how CFAI sets questions, they would probably test each step separately - eg - each stock - alpha, beta, error term - identify stocks - alpha, capm, systematic var, specific var - selecting of stocks: info ratio - weighting of stocks: appraisal ratio - active portf - calc alpha, beta, var, SD - select mix of active/passive portf - optimise, Sharpe - Modigliani Meas - maybe where it is used - low return/low risk, etc, maybe application in multi-factor seems like a lot of stuff, but you might get it again in 09. In L1 you can miss topics and get away with it - but in L2 you can’t afford to drop a whole item set - you have to know EVERYTHING! good luck !

That’s fine, but I don’t feel like deriving the equations as in CFAI textbook.

Quiz: Besides figuring out the Sharpe ratio of the overall portfolio, and M^2, etc., a simple question is what’s the expected return of the overall portfolio? What’s its std deviation?