Anyone understand the calculation for FMCAR?
what is that?
you want to explain what those letters mean
In PM, FMCAR for each factor = active factor risk/active risk squared But no idea how to calc active factor risk for a specific factor
wtf?
FMCARi = Marginal contribution of each factor (i) to the Active Risk squared For each factor i, it is calculated: FMCARi = (Active Factor Risk of i)/(Active Risk Squared) Active risk squared is the variance of the (Active Portfolio return - Benchmark return) pairs The Active Risk Squared value will likely just be given to you tho All this aside, I would say this is a concept that is very unlikely to be tested in quantitative terms; they’re more likely to ask a conceptual question related to it, than to explicitly ask you to find it, in my opinion anyway.
Oh, and this: Active Factor Risk for factor i = [(P’s Sensitivity to i – B’s Sensitivity to i)^2](s of i)^2 where P is portfolio B is Benchmark i is the factor s of i is the standard deviation of i (s of i)^2 means the variance of i just a 13itch to remember.
never heard of any of this…hope it doesn’t show up on the exam
This is why I hate AF sometimes. You think you’re all set until someone serves up a nasty five letter acronym you haven’t seen.
All above – and also, Active Risk Squared = Active Factor Risk + Asset-Specific Risk
No idea what happened here…
One of the last topics in the curriculum… i blew this off the moment I saw it. Trying to memorize it will probably cost me two equity formulas in my memory. Not worth it…
you don’t need to know them I don’t think; you need to be familiar with Treynor black, but I highly doubt they’d make you run through an entire treynor black question. It’s got all these layers to it; layer 1: start with the individual securities and analyze them by variance and factor sensitivity layer 2: put together the active portfolio based on the above for the optimal active portfolio layer 3: find the optimal combination of passive Market portfolio and active portfolio it’s like that movie inception, but opposite in its awesomeness
go over the example in CFAI book…will help for sure…Also read the latter parts as to why a portfolio of a person generating income from investments can enter into cyclical stocks etc…3 pages, worth a question…
We’ll let the PCP determine that. Just reported a violation! haha j/k
are some people taking this thing on June 5th somehow? I seen a lot of people say that… I’m thinking they’ll show up at the exam Sunday and be all like “YESTERDAY!?! no way brah, I got my exam ticket right… awwww”
magicskyfairy, props for making me actually LOL about something on a CFA message board. 2 posts in a row no less. Impressive.
?? The exam day is June 5th (sunday) for people in that time zone… http://www.cfainstitute.org/cfaprogram/exams/calendar/Pages/index.aspx
billy22g Wrote: ------------------------------------------------------- > magicskyfairy, props for making me actually LOL > about something on a CFA message board. 2 posts in > a row no less. Impressive. Yeah, the inception reference was clutch. Might be all it takes to make me remember the topic during the test. Question is: if after trying to answer the question, my head never stops spinning, am I still in the dream?
yeeeeah, i like to make learning fun 