who can really remember all the formulas.....


I just did a problem set that ask to calculate each of the four risk measures. I mean I only got sharp ratio right. The rest for the life of me can’t remember what the formula was. I lost 15 /18 marks on that question alone!!!

Does anyone expect those kind of formula intensive question to be on the exam?

I would expect those kinds of formulas. It becomes much easier when you understand the intuition behind them.

Expost alpha just takes the actual return and subtracts the CAPM forecasted return.

Treynor measure is just like the Sharpe ratio, but STDEV is replaced with beta.

M2 scales the excess return up/down so that it is comparable to the market… that is so that it becomes comparable on a risk level. Because the portfolio can have a higher return than the market just because the portfolio took greater risks, it is necessary to scale the return for the risk so the two are comparable.

keep plugging. until it sticks. repetition. repetition. repetition.

Agreed. There are too many formulas in the book.

However, if you focus on doing practice exams you will find that the same ones keep popping up and focus on those. I do think Treynor, Jensen, Sharpe, Information Ratio, M2 will get a run though, so at least get them down.

u remembered all the formulas when u passed lvl 2 didn’t u

Actually, I was thinking of writing a post to check whether everyone feels the same as I do, that L3 has waaaay less formulas than L1 OR L2… So far, actually I think L3 is easier in that respect. I’m feeling like if the material intuitively makes sense while reading it, L3 is easier to understand than the other levels. Does anyone agree? Perhaps this is the wrong thread for people supporting my feelings…

Easier to understand, yes…but waaay more difficult to implement in an exam context. At least, according to me.