we’ve had this discussion but did we decide whether we needed to know the formula? the concept, easy enough, the formula, not so much… everyone who took it last year says the now infamous tb problem was calculation intensive. (although it’s hard to tell because noone wants to talk about last year.) i’m taking that as we need to know the formula. agree? sorry for the dumb/repetitive question. spent today reviewing port mgmt and i’m just burned out.

Can we try to game the exam…would the Institute really test it twice in a row? Is it really THAT important?? As someone who’s going to fail the exam…I’m taking my chances and accepting that I won’t remember it by June 7.

This T-B debacle has got be so anxious that I am willing to pay more for the 2007 paper than I would for a 2008 paper. SERIOUSLY (no jokes for the 1st time in my life) Please somebody speak up. What was there in last years paper for TB. It would be of great help to us. I understand it was brutal, but atleast give us some idea rather leaving us in the dark.

I reviewed PM too. The only calculation intensive question was a plug and chug CAPM. The expected return was about 2% less than required. The usual alpha for the firm was 1% (I forget how they worded it). Normally you would be overweight and short for the active portfolio. Somewhere in the question they said the guy making the forecast blows, so the answer was short and underweight in the active portfolio. That is the only calculation for TB that I have encountered since I began studying.

i think we need to know it. i was just getting lazy. i’ll have to look up the los again. i’m not going to try to game the exam. even if its a remote chance they test it again. if i skipped it and they tested it, i would have some serious problems with myself. i would probably stand up in the middle of the exam, say something inappropriate out loud and get myself kicked out. not kidding.

Nib, i ask because there was a T/B calculation problem in the text. full on calculation. it wasn’t a vignette or multiple choice, but it still, they asked a question that required the formula. did you not see it? and that is what made me post.

I guess I missed it. What was the page #?

cfasf1, If you are talking about the weighting formula for the active portfolio try to look at it again and understand what it is saying. It isn’t that hard to remember once you understand the logic behind it. For a two stock active portfolio: w1=(alpha1/unsystematic risk1) / [(alpha1/unsystematic risk1)+(alpha2/unsystematic risk2)] w2=1-w1 The basic idea is that you will have heavy weighting for stocks with big alphas and low unsystematic risk. The weighting will be positive for postive alphas (long) and negative for negative alphas (short).

in the cfa text, pg 489. prob. 1 B. construct the optimal risky portfolio. then the answer in the back starts w/ “using the treynor black technique, we construct the active portfolio…” and proceeds w/ the formulas. this sounds like we should know it, though i havent’ run into any of this in the qbank.

mwvt, thanks. for some reason the weighting formula just won’t stick… conceptually it’s very easy to get. but when i came upon the question in the text, i drew blank.

Here are the t/b los’s. i’m not taking chances, i’ll get the formula down. just had to whine about it a little. Discuss the steps and the approach of the Treynor-Black model for security selection. Describe how an analyst’s accuracy in forecasting alphas can be measured and how estimates of forecasting can be incorporated into the Treynor-Black approach.

I haven’t done these problems (I hope to), but I did look at it very quickly. Remember that in the CAPM world your expected return on any stock will be determined as: E®=rf+B(market prem)+error term. This is actually a regression equation where the dependant variable is your stock and teh independant variable is the market. Since this is only looking at systematic risk, the error term on the end of the regression is unsystematic risk. The SD of the residuals (error) is given in problem, but you need the variance of the error to figure out the weights so you have to square it. Just plug and chug from there to determine each stocks weight.

I am probably just annoying you now because you know how to do it, but just drew a blank. These threads are what makes me remember the stuff on gameday though.

yep. i had no problem at all with the first part (A), getting alpha and residual variances. my problems came on part (B) where i had to pull out the t/b weighting formulas and i just was not accustomed to it yet. i’m going to force myself to have this down.

not annoying at all. responses like these are exactly why i post. so i remember the stuff on gameday, just like you said.

How is the prep going anyway…have you taken any more mock or are you reviewing for awhile?

and the final verdict is: know the freaking formula, it’s not that hard!

back to reviewing. i have the sf society mock test this weekend. i’m not going to do any other tests til then. when’s that first mock coming for you?

I still haven’t finished the readings yet. I will probably be able to finish econ tomorrow, then I just have ethics left. That should go pretty quick since most of it is review. Then I don’t know what I will do because I really don’t feel like I remember anything at all. The max I took on any SS was 3 days (some were 1 day), which is way too fast for my brain. I haven’t come up with a good end game yet. I will have to give it some thought. Mocks will probably come in about 2-2.5 weeks though.

yeah, nothing new in ethics but soft dollar and prudent investor… good job, man. you really knocked it out these last couple of months. it will all come together for you here in the last month. good luck. and now get some sleep! i’m on the west coast and i’m going to call it a night. you make me feel like a slacker.