so dumb. who thought of putting an item set on this topic on the exam.
My understanding of Treynor Black: 1. Determine Market expectations 2. Find mispriced securities 3. Determine what % of active portion of portfolio should be allocated to Mispriced securities 4. Determine what % of total portfolio should be allocated to active portion of portfolio If market is efficient, there are no mispriced securities, therefore no active portion of portfolio. How’s that look? All the math can be ignored according to CFAI book.
boost Wrote: ------------------------------------------------------- > My understanding of Treynor Black: > > 1. Determine Market expectations > 2. Find mispriced securities > 3. Determine what % of active portion of portfolio > should be allocated to Mispriced securities > 4. Determine what % of total portfolio should be > allocated to active portion of portfolio > > If market is efficient, there are no mispriced > securities, therefore no active portion of > portfolio. > > > How’s that look? All the math can be ignored > according to CFAI book. looks good to me, that’s about as much effort as Im gonna put into it.
I did all the CFAI questions for it. I am a sucker…
yea, not gonna try the CFAI questions. Enough is enough. Those Treynor Black questions in CFAI books are just plain unreasonable and unnecessarily complicated, even by CFA standards. And that FAMCAR stuff too. Who can tell me what is that about?
boost Wrote: ------------------------------------------------------- > My understanding of Treynor Black: > > 1. Determine Market expectations > 2. Find mispriced securities > 3. Determine what % of active portion of portfolio > should be allocated to Mispriced securities > 4. Determine what % of total portfolio should be > allocated to active portion of portfolio > > If market is efficient, there are no mispriced > securities, therefore no active portion of > portfolio. > > > How’s that look? All the math can be ignored > according to CFAI book. I would add one more point between 2 and 3. Find the weights of the individual mispriced securities, giving positive weights to positive alpha’s, negative weights to negative alpha’s, penalizing securities with small alpha’s and high unsystematic risks, and tilting towards large alpha’s and small unsystematic risks. Yea Ali - I did them too. LOVED IT. Hope I get to do such things at work some day.
Are you being sarcastic? I would certainly hope so, good sir.
Isn’t there an allocation to a passive portfolio too? One that follows the market to combine with the active portfolio.
Yeps. 1st decide composition of Active Portfolio, then you have the Passive Index Market portfolio already ready, so now you decide the weightings of Active and the the Passive to get a Optimal Risky portfolio and once done, then we need to decide the weightings between that optimal risk port and the risk free asset.
Nice explanation. You’re such a good contributor;)
Thanx SG… looks like your concepts are concrete and solidified, like a priest who reads the mantras aloud… Here is my say: If CPK is the god…you are the goddess here on the forum…
Good contribution
The Schweser people said that they had a complete item set on Treynor Black in 2007 or 2008. I dont know what was in it but there was a lot of complication. Heard something from AI is coming this year to give the Level 2 students a great time. Oh, there are taxes this year pushed from L3 in PM, so that going to be a huge deal. So something really nice from there. lets hope this year, they give good questions…