having only done schweser tests so far (CFA ones to come), for people that have done both so far, can you answer me this. it seems schweser has too many ‘list this’ type question or state benefits/weakness of this index etc. whereas i’m inclined to think the CFA will test us more on ‘real’ concepts and not so much listing but rather understanding… for people that have practiced both, can anyone comment on that?
on the CFA free sample exam they have a question about real estate indexes …it kind of took me by surprise since i didnt really pay too much attention to it while going through the material
was that one on the freebie…I think i remember that one.
yeah it was the freebie …there was a Q about NACREIT
For those real estate index, you would suggest to understand the disadvantage and bias. Smooth vs unsmooth REIT(indirect) index vs Direct index How are they different, what bias they suffer, what caused the bias?
Smooth vs unsmooth - Smooth has lower std deviation than unsmoothed, so risk is understated in smooth REIT vs Direct - REIT is an indirect ownership and its leveraged, teh Direct is Direct ownership and is considered unleveraged (contrary to belief, but thats what i remember). Also within REIT there is Hedged vs Unhedged. Hedged REIT index helps to remove the equity-likeness of the index I believe…
^Nail on the head!!!
when adding to your portfolio: Direct RE: decreased SD, decreases return slightly, and increases diversification Indirect RE: no real change to SD or diversification, but increases return a lot, highly correlated to equity is this accurate?
for indirect RE your statement is accurate, but I would remove “a lot” part for the increase of return, REITs do increase returns but not by a lot