2019文档资料3 cfa 2019 l1 notes2019年cfa l1 quicksheet

1、/C r i t ic a lC o n c e pt s f o rt h e 20 19 C F AExa mExpected return, variance o f 2-stock portfolio.ETHICAL AND PROFESSIONAL STANDARDSApproximation formula for nominal required rate: E(R) = RFR + IP + RPMeansArithmetic mean: sum of all observation values in sample/population, divided by # of ob

2、servations. Geometric mean: used when calculating investment returns over multiple periods or to measure compound growth rates.Geometric mean return:Rc= (l + R 1) x . . . x ( l + R N)Y/N* 1E(R P) = w a E(Ra ) + w bE(Rb)I1(A)1(B)1(C)1(D) II 11(A)11(B) III III(A)III(B)III(C)III(D)III(E) IV IV(A)IV(B)I

3、V(C)VProfessionalismKnowledge of the Law. Independence and Objectivity. Misrepresentation.Misconduct.Integrity of Capital Markets Material Nonpublic Information. Market Manipulation.Duties to ClientsLoyalty, Prudence, and Care. Fair Dealing.Suitability.Performance Presentation. Preservation of Confi

4、dentiality. Duties to EmployersLoyalty.Additional Compensation Arrangements. Responsibilities of Supervisors.Investment Analysis, Recommendations, and ActionsDiligence and Reasonable Basis. Communication with Clients and Prospective Clients.Record Retention. Conflicts of Interest Disclosure of Confl

5、icts. Priority of Transactions. Referral Fees.Responsibilities as a CFA Institutevar(R p) = w 2 cr2 (R A) + w 2cr2 (R B)+2w AwBcr(RA)cr(RB) p (R A,R B)Normal DistributionsNormal distribution is completely described by its mean and variance.68% of observations fall within Ict. 90% fall within 1.65a.9

6、5% fall within 1.96a. 99% fall within 2.58a.Computing Z-ScoresZ-score: “standardizes” observation from normal distribution; represents # of standard deviations a given observation is from population mean.Nharmonic mean =NEi=l ,x ,Variance and Standard DeviationVariance: average of squared deviations

7、 from mean.N ( Xi M)2population variance =cr2=-Nz = observation population meanstandard deviationBinomial Modelsx flaV(A)V(B)Binomial distribution: assumes a variable can take one of two values (success/failure) or, in the case of a stock, movements (up/down). A binomial model can describe changes i

8、n the value of an asset or portfolio; it can be used to compute its expected value over several periods.Sampling DistributionSampling distribution: probability distribution ofall possible sample statistics computed from a set of equal-size samples randomly drawn from the same population. The samplin

9、g distribution o f the mean is the distribution of estimates of the mean.Central Limit TheoremCentral lim it theorem: when selecting simple random samples of size n from population with mean p and finite variance a 2, the sampling distribution of sample mean approaches normal probability distributio

10、n with mean p and variance equal to a 1In as the sample size becomes large.Standard ErrorStandard error o f the sample mean is the standard deviation of distribution of the sample means.nEsample variance =s2= i=l( x i - x ) 2V(C) VI VI(A)VI(B)VI(C)VIIn 1Standard deviation: square root of variance.Ho

11、lding Period Return (HPR)RPr-Pr-t+ D rPt-1or_ !Member or CFA CandidatePt-1VII(A) Conduct as Participants in CFA Institute Programs.VII(B) Reference to CFA Institute, the CFA Designation, and the CFA Program.Global Investment Performance Standards (GIPS)Coefficient of VariationCoefficient o f variati

12、on (CV): expresses how much dispersion exists relative to mean of a distribution; allows for direct comparison of dispersion across different data sets. CV is calculated by dividing standard deviation of a distribution by the mean or expected value of the distribution:CV = =XSharpe RatioSharpe ratio

13、: measures excess return per unit of risk.Compliance statement: “Insert name of firm has prepared and presented this report in compliance with the Global Investment Performance Standards (GIPS).” Compliance must be applied on a firm-wide basis.Nine sections: fundamentals ofcompliance, input data, ca

14、lculation methodology, composite construction, disclosures, presentation and reporting, real estate, private equity, and wrap fee/separately managed account portfolios.bcn, arpe ratio = rP - r-f-aaknown population variance: a =rp targetQUANTITAT VE ME HODSTime Value of Money BasicsRoys safety-first

15、ratio:unknown population variance: s* =For both ratios, larger is better. Expected Return/Standard Deviation Expected return: E(X) = P ( x j) xnE(X) = P(x 1) x 1+ P (x 2) x 2 + . + P(xn) x nConfidence IntervalsConfidence interval: gives range of values the mean value will be between, with a given pr

16、obability (say 90% or 95%). With known variance, formula for a confidence interval is:Future value (FV): amount to which investment grows after one or more compounding periods. Future value: FV = PV(1 + I/Y)N.Present value (PV): current value of some future cash flow PV - FV/(1 + I/Y)N.Probabilistic

17、 variance:Annuities: series of equal cash flows that occur at evenly spaced intervals over time.Ordinary annuity: cash flow at end-oFume. period. Annuity due: cash flow at beginning-of-time period. Perpetuities: annuities with infinite lives.a2( x ) = E p(xi ) h - E(x )f= P(x1)x1- E ( X ) f + P(x 2)

18、x2 -E (X ):+ . + P(xn)x E ( x ) fx zall1.645 for 90% confidence intervals (significance level 10%, 5% in each tail)ZaJ2Z = 1.960 for 95% confidence intervalsPV. = PMT/(discount rate).allperpetuityvStandard deviation: take square root of variance.Correlation and CovarianceCorrelation: covariance divi

19、ded by product of the two standard deviations.COV (Rj, Rjcorr RR: =(significance level 5%, 2.5% in each tail)Required Rate of ReturnComponents:1. Real risk-free rate (RFR).2. Expected inflation rate premium (IP).3. Risk premium.E(R) =(1 + RFRreal)(l + IP)(1 + RP) 1Z = 2.575 for 99% confidence interv

20、alsall(significance level 1%, 0.5% in each tail)continued onnext page.QUANTITATIVE METHODS continued.Null and Alternative HypothesesNull hypothesis (H): hypothesis that contains the equal sign (=, ); the hypothesis that is actually tested; the basis for selection of the test statistics.Alternative h

21、ypothesis (Ha): concluded if there is sufficient evidence to reject the null hypothesis.Difference Between One- and Two-Tailed Tests One-tailed test: tests whether value is greater than or less than a given number.Two-tailed test: tests whether value is equal to a given number. One-tailed test: H 0:

22、 p 0. Two-tailed test: H 0: p = 0 versus Ha p * 0.Type I and Type II Errors Type I error: rejection of null hypothesis when it is actually true. Type II error: failure to reject null hypothesis when it is actually false.Types of Hypothesis TestsUse t-statistic for tests involving the population mean

23、 (location of mean, difference in means, paired comparisons).Use chi-square statistic for tests of a single population variance.Use F-statistic for tests comparing two population variances.Technical AnalysisReversal patterns: head and shoulders, inverse H&S, double/triple top or bottom.Continuation

24、patterns: triangles, rectangles, pennants, flags.Price-based indicators: moving averages, Bollinger bands, momentum oscillators (rate of change, RSI, stochastic, MACD).Sentiment indicators: opinion polls, put/call ratio, VIX, margin debt, short interest ratio.Flow o f funds indicators: TRIN, margin

25、debt, mutual fund cash position, new equity issuance, secondary offerings.Oligopoly: Few firms that may have significant pricing power; high barriers to entry; products may be homogeneous or differentiated.Monopoly: Single firm with significant pricing power; high barriers to entry; advertising used

26、 to compete with substitute products.In all market structures, profit is maximized atthe output quantity for which marginal revenue = marginal cost.Gross Domestic ProductReal GDP = consumption spending + investment + government spending + net exports.Savings, Investment, Fiscal Balance, and Trade Ba

27、lanceFiscal budget deficit (G - T) = excess of saving over domestic investment (S - I) - trade balance (X - M)Equation of ExchangeMV = PY, where M = real money supply, V = velocity of money in transactions, P = price level, and Y = real GDP.Business Cycle PhasesExpansion; peak; contraction; trough.E

28、conomic IndicatorsLeading: Turning points occur ahead of peaks and troughs (stock prices, initial unemployment claims, manufacturing new orders)Coincident: Turning points coincide with peaks and troughs (nonfarm payrolls, personal income, manufacturing sales)Lagging: Turning points follow peaks and

29、troughs (average duration of unemployment, inventory/ sales ratio, prime rate)Factors Affecting Aggregate Demand Consumers wealth; business expectations; consumers income expectations; capacity utilization; monetary and fiscal policy; exchange rates; global economic growth.Factors Affecting SR Aggre

30、gate SupplyInput prices; labor productivity; expectations for output prices; taxes and subsidies; exchange rates; all factors that affect LR aggregate supply.Factors Affecting LR Aggregate SupplySize of labor force; human capital; supply of natural resources; stock of physical capital; level of tech

31、nology.Types of UnemploymentFrictional: time lag in matching qualified workers with job openings.Structural: unemployed workers do not have the skills to match newly created jobs.Cyclical: economy producing at less than capacity during contraction phase of business cycle.Policy MultipliersBalance of

32、 PaymentsCurrent account: merchandise and services; income receipts; unilateral transfers.Capital account: capital transfers; sales/purchases of nonfinancial assets.Financial account: government-owned assets abroad; foreign-owned assets in the country.Regional Trading AgreementsFree trade area: Remo

33、ves barriers to goods and services trade among members.Customs union: Members also adopt common trade policies with non-members.Common market: Members also remove barriers to labor and capital movements among members. Economic union: Members also establish common institutions and economic policy.Mon

34、etary union: Members also adopt a common currency.Foreign Exchange RatesFor the exam, FX rates are expressed as price currency / base currency and interpreted as thenumber of units of the price currency for each unit of the base currency.Real Exchange Ratebase currency CPIprice currency CPI y= nomin

35、al FX rate XNo-Arbitrage Forward Exchange Rateforward 1 + price currency interest ratespot1 + base currency interest rateExchange Rate RegimesFormal dollarization: country adopts foreign currency.Monetary union: members adopt common currency. Fixedpeg: 1% margin versus foreign currency or basket of

36、currencies.Target zone: Wider margin than fixed peg. Crawling peg: Pegged exchange rate adjusted periodically.Crawling bands: Width of margin increases over time.Managedfloating: Monetary authority acts to influence exchange rate but does not set a target. Independently floating: Exchange rate is ma

37、rket- determined.1ECONOMICSElasticityOwn p rice elasticity%A quantity demanded% A priceIf absolute value 1, demand is elastic. If absolute value 1, demand is inelastic.On a straight line demand curve, total revenue is maximized where price elasticity =1.F in an c ial r e p o r t in g an d.ANALYSISRe

38、venue RecognitionTwo requirements: (1) completion of earnings process and (2) reasonable assurance of payment.Revenue Recognition Methods%A quantity demanded%A incomeIncome elasticityIf positive, the good is a normal good. If negative, the good is an inferior good.Cross p r.ic.e. e.lasticity = -%A q

39、uantity demandedmoney multiplier = - -reserve requirementPercentage-of-completion method. Completed contract method.Installment sales.Cost recovery method.%A price of relatedgoodIf positive, related good is a substitute.If negative, related good is a complement.Breakeven and ShutdownBreakeven: total

40、 revenue = total cost.Operate in short run if total revenue is greater than total variable cost but less than total cost.Shut down in short run if total revenue is less than total variable cost.Market StructuresPerfect competition: Many firms with no pricing power; very low or no barriers to entry;

41、homogeneous product.Monopolistic competition: Many firms; some pricing power; low barriers to entry; differentiated products; large advertising expense.fiscal multiplier =-l- M P C ( l- t )where MPC = marginal propensity to consume, t= tax rate.Expansionary and Contractionary Policy Monetary policy

42、is expansionary when the policy rate is less than the neutral interest rate (real trend rate of economic growth + inflation target) and contractionary when the policy rate is greater than the neutral interest rate.Fiscalpolicy is expansionary when a budget deficit is increasing or surplus is decreas

43、ing, andcontractionary when a budget deficit is decreasing or surplus is increasing.Converged Standards Issued May 2014Five-step revenue recognition model:1. Identify contracts2. Identify performance obligations3. Determine transaction price4. Allocate price to obligations5. Recognize when (as) obli

44、gations are satisfiedUnusual or Infrequent ItemsGains/losses from disposal of a business segment. Gains/losses from sale of assets or investments insubsidiaries.Provisions for environmental remediation.continued onnext page.FINANCIAL REPORTING AND ANALYSIS continued. Impairments, write-offs, write-d

45、owns, and restructuring costs. Integration expenses associated with businesses recently acquired.Discontinued OperationsTo be accounted for as a discontinued operation, a business assets, operations, investing, financing activities must be physically/operationally distinct from rest of firm. Income/

46、losses are reported net of tax after net income from continuing operations.Compute Cash Flows From Operations (CFO) Direct method: start with cash collections (cash equivalent of sales); cash inputs (cash equivalent of cost of goods sold); cash operating expenses; cash interest expense; cash taxes.I

47、ndirect method: start with net income, subtracting back gains and adding back losses resulting from financing or investment cash flows, adding back all noncash charges, and adding and subtracting asset and liability accounts that result from operations.Free Cash FlowFree cash flo w (FCF) measures ca

48、sh available for discretionary purposes. It is equal to operating cash flow less net capital expenditures.Critical RatiosCommon-sizefinancial statement analysis:Held-to-maturity: amortized cost on balancesheet; interest, realized G/L recognized on income statement.Inventory AccountingIn periods of r

49、ising prices and stable or increasing inventory quantities:Total asset, fixed-asset, and working capital turnover ratios:revenue average total assetsrevenueaverage fixed assetstotal asset turnover =fixed asset turnover =LIFO results in: Higher COGS Lower gross profit Lower inventory balancesBasic an

50、d Diluted EPSFIFO results in: Lower COGS Higher gross profit Higher inventory balancesrevenueaverage working capitalworking capital turnover =Gross, operating, and net profit margins:f,.gross profitBasic EPS calculation does not consider effects of any dilutive securities in computation of EPS:gross

51、 profit margin = -revenue.operating profitEBITnet income preferred dividendsoperating profit margin = - -net salesbasic EPS =wtd. avg. no. of common shs. outstandingrevenuenet incomerevenue.adj. income avail, for common sharesdiluted EPS = -wtd. avg. common shares plus potential common shares outsta

52、ndingTherefore, diluted EPS is:net profit margin =Return on assets return on total capital (ROTC)J:return on assets _ (total capital)EBITaverage total capitalconvertibleconvertible preferred +debtdividendsinterestnet _ pfd +(1 -t)Debt to equity ratio and total debt ratio:incomedivtotal debttotal equ

53、itywtdsharesfromshs fromsharesdebt-to-equity ratio =awconversion of+ conversion + issuable from+sh sconv. pfd.shsstock optionsconv. debttotal debttotal-debt-ratio =total assetsInterest coverage andfixed charge coverage:interest coverage = 7EBITinterestCommon-size balance sheet expresses all balance

54、sheet accounts as a percentage of total assets.Long-Lived Assets Capitalizing vs. Expensing Capitalizing: lowers income variability and increases near-term profits. Increase assets, equity. Expensing: opposite effect.Depreciationcost residual valueStraight-line: -useful lifeDouble declining balance:

55、 Common-size incom e statement expresses allincome statement items as a percentage of sales. Common-size cash flow statement expresses each line item as a percentage of total cash inflows (outflows), or as a percentage of net revenue.Horizontal common-size fin ancial statement analysis: expresses each line item relative to its value in a common base period.Liquidity ratios:current ratio =7-77current liabilitiesquick ratio = cash + marketable securities + receivab