Equity and fixed income CFA 2016

Secondary Security Market and Contract Market Structures Trading Sessions Execution Mechanisms Market Information Systems Well-Functioning Financial Systems Market Regulation Summary Practice Problems Solutions

 

Reading 47 Security Market Indices

 

Introduction

 

Index Definition and Calculations of Value and Returns Calculation of Single-Period Returns Calculation of Index Values over Multiple Time Periods,

 

Index Construction and Management

 

Target Market and Security Selection Index Weighting

 

Index Management: Rebalancing and Reconstitution Uses of Market Indices

 

Gauges of Market Sentiment

 

Proxies for Measuring and Modeling Returns, Systematic Risk, and Risk-Adjusted Performance Proxies for Asset Classes in Asset Allocation Models

 

Benchmarks for Actively Managed Portfolios

 

Model Portfolios for Investment Products Equity Indices

 

Broad Market Indices Multi-Market Indices Sector Indices Style Indices Fixed-Income Indices Construction

 

Types of Fixed-Income indices Indices for Alternative Investments Commodity Indices Real Estate Investment Trust Indices Hedge Fund Indices Summary Practice Problems Solutions

 

Reading 48 Market Efficiency

 

Introduction

 

The Concept of Market Efficiency

 

The Description of Efficient Markets

 

Market Value versus Intrinsic Value

 

Factors Contributing to and Impeding a Market's Efficiency

 

Transaction Costs and Information-Acquisition Costs

Weak Form 125

 

Semi-Strong Form 125

 

Strong Form 128

 

implications of the Efficient Market Hypothesis 128

 

Market Pricing Anomalies 129

 

Time-Series Anomalies 130

 

Cross-Sectional Anomalies 132

 

Other Anomalies 133

 

Implications for Investment Strategies 136

 

Behavioral Finance 136

 

Loss Aversion 137

 

Herding 137

 

Overconfidence 137

 

Information Cascades 138

 

Other Behavioral Biases 138

 

Behavioral Finance and Investors 139

 

Behavioral Finance and Efficient Markets 139

 

Summary 139

 

Practice Problems 142

 

Solutions 145

 

Study Session 14 Equity Analysis and Valuation 147

 

Reading 49 Overview of Equity Securities 149

 

Introduction 149

 

Equity Securities in Global Financial Markets 150

 

Types and Characteristics of Equity Securities 155

 

Common Shares 156

 

Preference Shares 159

 

Private versus Public Equity Securities 162

 

Investing in Non-Domestic Equity Securities 164

 

Direct investing 165

 

Depository Receipts 166

 

Risk and Return Characteristics of Equity Securities 169

 

Return Characteristics of Equity Securities 169

 

Risk of Equity Securities 170

 

Equity Securities and Company Value 172

 

Accounting Return on Equity 172

 

The Cost of Equity and Investors'Required Rates of Return 177

 

Summary 178

 

Practice Problems 180

 

Solutions 184

 

Reading 50 Introduction to Industry and Company Analysis 187

 

introduction 188

 

Uses of Industry Analysis 188

 

Approaches to Identifying Similar Companies 189

 

Products and/or Services Supplied • 189