- CFA Exams
- 2022 Level I
- Study Session 17. Portfolio Management (1)
- Reading 50. Portfolio Risk and Return: Part II
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Learning Outcome Statements PDF Download
| 1. Capital Market Theory a. describe the implications of combining a risk-free asset with a portfolio of risky assets; b. explain the capital allocation line (CAL) and the capital market line (CML); | |
| 2. Pricing of Risk and Computation of Expected Return c. explain systematic and nonsystematic risk, including why an investor should not expect to receive additional return for bearing nonsystematic risk; d. explain return generating models (including the market model) and their uses; e. calculate and interpret beta; | |
| 3. The Capital Asset Pricing Model f. explain the capital asset pricing model (CAPM), including its assumptions, and the security market line (SML); g. calculate and interpret the expected return of an asset using the CAPM; | |
| 4. Applications of the CAPM h. describe and demonstrate applications of the CAPM and the SML; i. calculate and interpret the Sharpe ratio, Treynor ratio, M2, and Jensen's alpha. |
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