Honestly and sadly I find PM so boring and Im like dragging on it…Find it hard to make much sense.
Anyone who once have been into this can advise a bit which part I shall focus? the formula or the concepts? Any típs to undertand this better?
I’m drowning…
This was a hard topic for me and I scored badly in previous exams, but I think the key is to understand MV analysis “very” well…make sure you get the idea of the efficient frontier curve and why portfolios plot on the curve. For example, if you take a few stocks at random and form a portfolio out of those stocks, where will that portfolio plot? You should understand that based on how much you buy of each stock (the weights), you’ll get a different portfolio, so it’s not just one portfolio, even though it’s made up of the same stocks! only one combination(s) will be mean variance efficient, that is it will get you the highest return for a given std deviation. That combination will plot on the CAL, not necessarily on the CML. The CAL is your curve. The CML is everyone’s curve…it’s the one with market portfolio sitting at the most efficient place. That’s just a start, hope it helps.
Thanks so much for your kindness.
feeling the same here. The next reading “International Asset Pricing” is hard and long. So many things conceptually to understand and remember. At this point, would like to finish the PM.
Is this reading “International Asset Pricing” important?
int’l asset pricing is very important
Thanks, AndrewUNH
I wouldn’t be surprised if questions pop up over active risk, active return, and all that stuff. I would be surprised to see stuff exclusively about the CAL, CML, etc, since that is just a refresher from level 1… but you never know.
IMO , there wont be a standalone vignette on any single reading but CFAI will thread together all the concepts in a vignette , so its quite important to know almost all of it and each reading is different in its own way , such as MM theory , CAL , CML , active risk , use of treynor - black model ( a seminal contribution) and definitely on Int’ asset pricing , FCRP and differences between CAPM and ICAPM and dont miss the differences between multifactor models , APT which draws the concepts from multiple regression in quant .
Even though the readings are quite esoteric , I think apart from understanding the nuances one would be better off interpretting the concepts and trying to search anwers for these questions
what is the concept trying to convey ?
What are differences in the models used ? and why ? for ex : APT and CAPM , Treynor black model , FCRP and interest rate parity ( same as the one in economics)
Purpose of the models or practical applicability - for ex : active risk and benchmark portfolios .
All the best