The calculations on Exhibit 11 on Vol. 4 page 270 are driving me crazy! I checked the Errata sheet, it only says to calculate the Cov. by using n-1 rather than n. However, whoever was doing this calculation must be sleeping. I found a list of wrong data in the calculations. If possible, I’d like some of you to verify together with me. 1. Var(s&p) - the St. Dev. (s&p) should be 2.36. Book says 2.09 2. Var (msci) - the St. Dev. (msci) should be 3.97. Book says 2.36 3. r(ge, s&p) = Cov. (ge, s&p)/theta ge x theta s&p = 3.9/2.09 x 2.36. Book is using msci’s theta 3.97 4. r(ge, msci) = Cov. (ge, msci)/theta ge x theta s&p = 3.6/2.09 x 3.97. Book is using s&p’s theta 2.36 instead of ge’s one 2.09 5. Alpha = Avg GE Return - Beta (ge, benchmark) x Avg Benchmark Return Is the above equation correct? I derived it from the characteristic line formular. Assume it’s correct, then Alpha (ge, s&p) = 0.74 - (0.82 x 1.04) Alpha (ge, smci) = 0.74 - (0.59 x 1.45) Unless I’m sleeping now, otherwise, the data used in these calculations seem scrambled. Thx for your great patience on this.
I don’t have the book, but those std. dev’s are sigma’s not theta’s. Edit: And, yes, Chrismaths, I knopw you don’t like the “'s”
Ah, yes. It’s sigma. Too bad I can’t type Greek and somehow I always mix sigma & theta. Anyway, it seems there are just a bunch of wrong data on Vol. 4 page 270. One more catch - could by typo. The column GE: it should be R(GE) - mean R(GE). The book shows mean R(GE) - mean R(GE).
I just did a quick check on the variance … I think the problem was with printing … if you calculate the variance/st dev in excel of the returns of s&P, msci, and GE it is correct … it is actually 2.09 and the book used it correctly…
So what confused me was its printing? I’ll need to review it again. Thx, mada. My current problem is it seems ok I’m reading & working on the material at hand. However, whatever I read a month or two months ago seems fading away… Any advice?
make notes and do practice tests on each SS … and review the notes … make a revision plan … spare yourself with atleast 15 days for review before exam … and dont forget to mention your boss about exam leave… things will turn out okay … dont spend too much time on calculations … grasp the concepts in detail … most of the questions on recent L1 exam are about concepts …
Ok. Thx so much for the tips. Review periodically is really necessary. I try to read a bit thoroughly the first time and ask any questions I have. But the time is tight with the mundane routine… And when I finally had some time , my energy level is not the best. Anyway, just have to keep going.