2025 CFA Level II Exam: Topic 9. Portfolio Management - Learning Module 38. Analysis of Active Portfolio Management

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	1. Active Management and Value Added calculate and interpret the information ratio (ex post and ex ante) and contrast it to the Sharpe ratio;
	2. Comparing Risk and Return describe and interpret the fundamental law of active portfolio management including its component terms - transfer coefficient, information coefficient, breadth, and active risk (aggressiveness);
	3. The Fundamental Law of Active Management explain how the information ratio may be useful in investment manager selection and choosing the level of active portfolio risk; compare active management strategies, including market timing and security selection, and evaluate strategy changes in terms of the fundamental law of active management;
	4. Applications of the Fundamental Law describe the practical strengths and limitations of the fundamental law of active management.
	5. Practical Limitations describe arbitrage pricing theory (APT), including its underlying assumptions and its relation to multifactor models; define arbitrage opportunity and determine whether an arbitrage opportunity exists; calculate the expected return on an asset given an asset's factor sensitivities and the factor risk premiums;

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