Reading 13 EOC 1

I’ve answered this question about 3 different times and I continue to get it wrong, could someone help me to understand why the answer is the “If only” defense and not the “Cetarus Parabus” Defense? The “If only” defense claims the analyst would have been right “if only” the analyst had been listened to, whereas the Ceterus Parabus defense implies that the analyst was right but something else happened that threw off the results. In the cheif economist’s analysis the forcasted GDP was strong because he thought interests would be low, but instead GDP was not strong because the fed raised int. rates. the cheif economist blames the inaccuracy on the fed’s decision to raise rates. I’m just not sure how this isn’t the Cetarus Parabus defense. Any help?

I think the “if only” defense also has a little “i told you so” in there. So, the economist is saying that things would have been better (along with his forecast being right) if only they would have followed his advice.

I’m not sure I understand or see the " I told you so" in this question. The Chief economist is an employee of RIM and has no control or influence (I assume) over the Fed. The forecast is for the companies’ use. Is the “If only” defense saying that the economist would have been right “if only” the the Fed had kept rates in line with his prediction? - Isn’t this the same as the Ceteris Paribus defense? Could someone clear this blurred line for me? If these two defenses are that close why make a distiction b/w the two? If the two are so close why would the CFA say that the “if only” defense is correct and the Ceteris Paribus defense is wrong. I highly doubt the Institute will allow me to use the “I was almost right” defense if I get this question wrong on the exam.

Ceterus Paribus means “with all other things the same”. (Emphasis is on ALL) If-only – a particular thing had been so - then my prediction would have been right. Here - it is that particular item (interest rates)… (I understand this to mean, even if other things had changed - if Only interest rates had been the same - my prediction would have been correct).

Yes this is another one of those concepts that introduces so much interpretive subjectivity the CFA relishes in keeping the herd down - the “I told you so” interpretation depends on how you read into the case. Right or wrong - I normally try to consider whether this variable had been considered in the analysts original model or set of assumptions (reinforcing the “I told you so” classification irrespective of whether anyone would listen anyway) or in fact it was something not explicitly considered by the analyst (more unexpected) and suggesting the “cetaris parabus” syndrome.

He did consider the rates. He forecasted GDP to be strong because the Fed would keep interest rates low, but instead GDP was marginally positive as the Fed increased interest rates in order to keep inflation in check. “if only” things would have gone my way just googled…not that you should believe everything you read on the interweb…including me

Ok, I think I’ve got it… If the variable that changed was considered in the original analysis, it is the “If Only” Defense If the thing that happened was not originally in the analysis, it is the “Ceteris Paribus” Defense. for example: My prediction: I will get licky this weekend b/c I am smooth. Actual result: I don’t get lucky. The “If only” defense would be used in the case that I am not as smooth as I thought and The “Ceteris Paribus” defense would be used in the case that I stay home all weekend and study for the CFA exam. Is that correct?

Well, this is a difficult (and good) question. But I think that your conclusion above is right (although I don’t get the example). What I think is ‘ceteris paribus’ means if things would have stayed normal, predictions would have been right. E.g. if no revolutions in Northern Africa occurred, the oil prices would have been stable and markets would have gone up. So, the revolution was not in the original analysis. If the government would have decreased taxes on oil like predicted by experts, the markets would have gone up.