- CFA Exams
- Dec. 2020 Level 2
- Study Session 17. Portfolio Management II
- Reading 47. Analysis of Active Portfolio Management
Reading 47. Analysis of Active Portfolio Management
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Learning Outcome Statements
| Reading 47. Analysis of Active Portfolio Management | |
|---|---|
| 1. Active Management and Value Added a. describe how value added by active management is measured; | |
| 2. Comparing Risk and Return b. calculate and interpret the information ratio (ex post and ex ante) and contrast it to the Sharpe ratio; | |
| 3. The Fundamental Law of Active Management c. state and interpret the fundamental law of active portfolio management including its component terms - transfer coefficient, information coefficient, breadth, and active risk (aggressiveness); | |
| 4. Applications of the Fundamental Law d. explain how the information ratio may be useful in investment manager selection and choosing the level of active portfolio risk; e. compare active management strategies (including market timing and security selection) and evaluate strategy changes in terms of the fundamental law of active management; | |
| 5. Practical Limitations f. describe the practical strengths and limitations of the fundamental law of active management. |