- CFA Exams
- Dec. 2020 Level 2
- Study Session 16. Portfolio Management I
- Reading 44. Using Multifactor Models
Reading 44. Using Multifactor Models
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Learning Outcome Statements
Reading 44. Using Multifactor Models | |
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1. Arbitrage pricing theory a. describe arbitrage pricing theory (APT), including its underlying assumptions and its relation to multifactor models; b. define arbitrage opportunity and determine whether an arbitrage opportunity exists; c. calculate the expected return on an asset given an asset's factor sensitivities and the factor risk premiums; | |
2. Factors and types of multifactor models d. describe and compare macroeconomic factor models, fundamental factor models, and statistical factor models; | |
3. Multifactor models: selected applications e. explain sources of active risk and interpret tracking risk and the information ratio; f. describe uses of multifactor models and interpret the output of analyses based on multifactor models; g. describe the potential benefits for investors in considering multiple risk dimensions when modeling asset returns. |