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    [P2T8: Ang, Chapter 10: Alpha] : Conceptual Clarity on Formula of Alpha

    Hi @David Harper CFA FRM , I am very sorry that I am disturbing you as of this crucial moment. However reading more about the formula of Alpha has confused me to greater lengths than it should have. Hence I wanted a conceptual clarity on the formula of Alpha. 1. Now as I understand it we...
  2. Nicole Seaman

    P2.T8.709. Ang on Factors and Factor Theory

    Concept: These on-line quiz questions are not specifically linked to learning objectives, but are instead based on recent sample questions. The difficulty level is a notch, or two notches, easier than bionicturtle.com's typical question such that the intended difficulty level is nearer to an...
  3. Nicole Seaman

    P2.T8.708. Illiquidity risk premium & portfolio choice decision on the inclusion of illiquid assets

    Learning objectives: Compare illiquidity risk premiums across and within asset categories. Evaluate portfolio choice decisions on the inclusion of illiquid assets. Questions: 708.1. In order to identify the presence of illiquidity risk premium(s), Andrew Ang references data presented by Antti...
  4. Nicole Seaman

    P2.T8.707. The biases of illiquid markets (Ang)

    Learning objectives: Evaluate the characteristics of illiquid markets. Examine the relationship between market imperfections and illiquidity. Assess the impact of biases on reported returns for illiquid assets. Describe the unsmoothing of returns and its properties. Questions: 707.1. According...
  5. Nicole Seaman

    P2.T8.706. Alpha, style analysis and the risk anomaly (Ang)

    Learning objectives: Explain how to measure time-varying factor exposures and their use in style analysis. Describe issues that arise when measuring alphas for nonlinear strategies. Compare the volatility anomaly and beta anomaly, and analyze evidence of each anomaly. Describe potential...
  6. Nicole Seaman

    P2.T8.705. Berkshire Hathaway versus its benchmark (Ang)

    Learning objectives: Describe Grinold’s fundamental law of active management, including its assumptions and limitations, and calculate the information ratio using this law. Apply a factor regression to construct a benchmark with multiple factors, measure a portfolio’s sensitivity to those...
  7. Nicole Seaman

    P2.T8.704. Alpha and effective benchmarks (Andrew Ang)

    Learning objectives: Describe and evaluate the low-risk anomaly of asset returns. Define and calculate alpha, tracking error, the information ratio, and the Sharpe ratio. Explain the impact of benchmark choice on alpha, and describe characteristics of an effective benchmark to measure alpha...
  8. Nicole Seaman

    P2.T8.703. Value, size and momentum investing (Andrew Ang)

    Learning objectives: Assess methods of mitigating volatility risk in a portfolio, and describe challenges that arise when managing volatility risk. Explain how dynamic risk factors can be used in a multifactor model of asset returns, using the Fama-French model as an example. Compare value and...
  9. Nicole Seaman

    P2.T8.702. Macroeconomic risk factors including growth, inflation and volatility (Andrew Ang)

    Learning objectives: Describe the process of value investing, and explain reasons why a value premium may exist [BT note: this objective is somewhat out of sequence; the next practice question will review the value premium ]. Explain how different macroeconomic risk factors, including economic...
  10. Nicole Seaman

    P2.T8.701. Multifactor models (Andrew Ang)

    Learning objectives: Describe multifactor models, and compare and contrast multifactor models to the CAPM. Explain how stochastic discount factors are created and apply them in the valuation of assets. Describe efficient market theory and explain how markets can be inefficient. Questions...
  11. Nicole Seaman

    P2.T8.700. Theory of factor risk premiums (Andrew Ang)

    Learning objectives: Provide examples of factors that impact asset prices, and explain the theory of factor risk premiums. Describe the capital asset pricing model (CAPM) including its assumptions, and explain how factor risk is addressed in the CAPM. Explain implications of using the CAPM to...
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