What the ISH is Treynor Black in CFAI text

Have you guys looked at CFAI version of Terynor Black on the PM book(pg482-485) What in the heavens are they talking about?? Also, what was the big commotion about this in the previous tests anyway?

I think a couple of years ago CFAI had a whole vignette on TB and obviously, it’s only like a couple pages in the CFAI/Schweser books. So people were pissed that such a minute topic was tested. And so far I think (emphasize think) TB is a method of determining what the optimal weights would be for allocating to different securities in the optimal risky portfolio. An investor can put money partly into the market (index) portfolio, and part into the optimal risky portfolio based on his/her risk tolerance. TB is a model of determining the appropriate weights of the individual stocks in the optimal risky portfolio (as well as the weight to allocate to the mkt portfolio).

TB model is a several step model that creates an alpha portfolio and then defines optimal weights between the alpha portfolio and the index portfolio.

This might be a bit off the original thread’s topic (and I hate to hijack), but it’ll come up sooner or later (it always does). So what the heck. One of the criticisms you’ll hear about the Schweser (and Stalla) materials is that they cover some materials very briefly compared to the CFAI curriculum. So, if CFAI follows their recent pattern and throws a full item set at you on something like Treynor-Black (2 years ago) or Balance of Payments (last year), you get screwed. But, that’s the tradeoff with exclusively using a prep-provider’s material. By definition, it boils the material down so that you don’t have to read twenty pounds (that’s right) of material. That allows you to cover the whole span of material in quicker time and spend mroe time in review. So, there’s a tradeoff of breadth vs. depth. You’ll hear a lot of heated discussion as to whether you should use the curriculum exclusively, the prep material (most people here seem to favor Schweser over Stalla, but that’s just my impression), or some combination. My sense is that all three approaches work if you put in the time, and none do if you don’t. But I’m sure the topic will come up again (and again, and again, and again…)

> What in the heavens are they talking about?? I just finished those pages and I can tell you that their presentation of the topic is very poor, too many equations going back and forth without you knowing what is it they are trying to say. But then I just took a quick look at Stalla and it looks to be more clearly layed out.