With all the theories....

Is anyone else struggling to memorize all these theories and what they do?! There are so many of them!

Taylor Rule Mundell-Fleming Fisher Dornbush Breusch-Pagan Durbin-Watson Hansen Dickey-Fuller Cobb-Douglas …any more?!

are u taking all 3 levels at once?

This is level 2 only… I have seen all these theories in the CFA level 2 mock exam.

If someone tells me some of them are not part of the syllabus i would be really relieved

Don’t forget Modigliani and Miller and their four different propositions, with and without taxes.

I hate all the theories with these people naming them after themselves, why couldn’t they just call it what it really is?

My biggest struggle is with this because it’s all memorization.

Thanks for the reminder alliemcm, I really forgot (in fact, don’t know) about MM

Same here… and I am 100% certain that 1 week after the exam I will forget all of them.

In my opinion, learning the theory is ok, but in the exams, testing your ability to remember the names is not ok.

Every time I do a mock exam I seem to come across a theory that I either forgot or completely got wrong, my method is prayer and mass memorization before but I care more about actually understanding all the formulas than the 80 different economists’ theories.

I also think economists should stop theorizing about a world where markets are frictionless and have no taxes/transaction costs. Let’s just drop all those theories until that actually happens in the real world.

Try grouping them by the appropriate area of application, i.e. statistical, economic, etc. This might help since you are compartmentalizing the information a bit.

White correction for heteroskedasticity

herfindahl-hirschman for industry concentration

I commend you guys that try to memorize everything. Me personally, I’m trying to game this test and letting the chips fall where they may.

Ibbotson-Chen

Fama-French

Pastor-Stambaugh

Tobin’s Q

Black-Scholes-Merton (gulp, no chance but I think we only have to “recognize it”)

What in the world are these two? Did you just make them up?

Ibbotsen chen is the supply side premium (forgotten exact formula) and tobins Q is ( MVD + MVE / replacement cost)

Yes, today has been a formula day…

Ibbotson-Chen model is one type of the four main styles of deriving equity risk premiums. It’s a supply-side model versus historical, forward-looking, or survey. It’s briefly mentioned in SS#10. It uses several macroeconomic factors as inputs along with risk-free rate.

I don’t think you have to calc it, but it might show up as an example of a type of ERP model. Perhaps know what types of inputs, but what do I know?

Tobin’s Q was in the residual income valuation part of equity. It’s just the ratio of MVdebt+MVequity to replacement cost of total assets. Basically a ratio between 0 & 1 means it’s more costly to replace the firm’s assets than it is worth. Alternatively, a ratio greater than 1 indicates theoretically that a firm is overvalued in the market (apparently Tobin really wants his Q to be equal to 1).

At least the theories have names and forumulas.

Swaptions don’t even have formulas and every question seems to have dofferent steps. Reconciling the mathematical steps seem hopeless.