Study Session 18

Reading 51 (48 in 2022) – Portfolio Management: An Overview

– LOS 51a: describe the portfolio approach to investing
– LOS 51b: describe types of investors and distinctive characteristics and needs of each
– LOS 51c: describe defined contribution and defined benefit pension plans
– LOS 51d: describe the steps in the portfolio management process
– LOS 51e: describe aspects of the asset management industry
– LOS 51f: describe mutual funds and compare them with other pooled investment products

Reading 52 (49 in 2022) – Portfolio Risk and Return: Part I

– LOS 52a: calculate and interpret major return measures and describe their appropriate uses
– LOS 52b: compare the money-weighted and time-weighted rates of return and evaluate the performance of portfolios based on these measures
– LOS 52c: describe characteristics of the major asset classes that investors consider in forming portfolios
– LOS 52d: calculate and interpret the mean, variance, and covariance (or correlation) of asset returns based on historical data
– LOS 52e: explain risk aversion and its implications for portfolio selection
– LOS 52f: calculate and interpret portfolio standard deviation
– LOS 52g: describe the effect on a portfolio’s risk of investing in assets that are less than perfectly correlated
– LOS 52h: describe and interpret the minimum-variance and efficient frontiers of risky assets and the global minimum-variance portfolio
– LOS 52i: explain the selection of an optimal portfolio, given an investor’s utility (or risk aversion) and the capital allocation line

Reading 53 (50 in 2022) – Portfolio Risk and Return: Part II

– LOS 53a: describe the implications of combining a risk-free asset with a portfolio of risky assets
– LOS 53b: explain the capital allocation line (CAL) and the capital market line (CML)
– LOS 53c: explain systematic and nonsystematic risk, including why an investor should not expect to receive additional return for bearing nonsystematic risk
– LOS 53d: explain return generating models (including the market model) and their uses
– LOS 53e: calculate and interpret beta
– LOS 53f: explain the capital asset pricing model (CAPM), including its assumptions, and the security market line (SML)
– LOS 53g: calculate and interpret the expected return of an asset using the CAPM
– LOS 53h: describe and demonstrate applications of the CAPM and the SML
– LOS 53i: calculate and interpret the Sharpe ratio, Treynor ratio, M², and Jensen’s alpha

Reading 54 (51 in 2022) – Basics of Portfolio Planning and Construction

– LOS 54a: describe the reasons for a written investment policy statement (IPS)
– LOS 54b: describe the major components of an IPS
– LOS 54c: describe risk and return objectives and how they may be developed for a client
– LOS 54d: distinguish between the willingness and the ability (capacity) to take risk in analyzing an investor’s financial risk tolerance
– LOS 54e: describe the investment constraints of liquidity, time horizon, tax concerns, legal and regulatory factors, and unique circumstances and their implications for the choice of portfolio assets
– LOS 54f: explain the specification of asset classes in relation to asset allocation
– LOS 54g: describe the principles of portfolio construction and the role of asset allocation in relation to the IPS
– LOS 54h: describe how environmental, social, and governance (ESG) considerations may be integrated into portfolio planning and construction.

Reading 55(53 in 2022) – Introduction to Risk Management

– LOS 55a: define risk management
– LOS 55b: describe features of a risk management framework
– LOS 55c: define risk governance and describe elements of effective risk governance
– LOS 55d: explain how risk tolerance affects risk management
– LOS 55e: describe risk budgeting and its role in risk governance
– LOS 55f: identify financial and non-financial sources of risk and describe how they may interact
– LOS 55g: describe methods for measuring and modifying risk exposures and factors to consider in choosing among the methods

Reading 56 (54 in 2022) – Technical Analysis

– LOS 56a: explain principles of technical analysis, its applications, and its underlying assumptions
– LOS 56b: describe the construction of different types of technical analysis charts and interpret them
– LOS 56c: explain uses of trend, support, resistance lines, and change in polarity
– LOS 56d: describe common chart patterns
– LOS 56e: describe common technical analysis indicators (price-based, momentum oscillators, sentiment, and flow of funds)
– LOS 56f: explain how technical analysts use cycles
– LOS 56g: describe the key tenets of Elliott Wave Theory and the importance of Fibonacci numbers
– LOS 56h: describe intermarket analysis as it relates to technical analysis and asset allocation

Reading 57 (55 in 2022) – Fintech in Investment Management

– LOS 56a: describe “Fintech”
– LOS 56b: describe Big Data, Artificial Intelligence and Machine Learning
– LOS 56c: describe Fintech Applications to Investment Management
– LOS 56d: describe Financial Applications to Distributed Ledger Technology

2023 Curriculum

Reading 61– Portfolio Management: An Overview

– LOS 51a: describe the portfolio approach to investing
– LOS 51b: describe types of investors and distinctive characteristics and needs of each
– LOS 51c: describe defined contribution and defined benefit pension plans
– LOS 51d: describe the steps in the portfolio management process
– LOS 51e: describe aspects of the asset management industry
– LOS 51f: describe mutual funds and compare them with other pooled investment products

Reading 62– Portfolio Risk and Return: Part I

– LOS 52a: calculate and interpret major return measures and describe their appropriate uses
– LOS 52b: compare the money-weighted and time-weighted rates of return and evaluate the performance of portfolios based on these measures
– LOS 52c: describe characteristics of the major asset classes that investors consider in forming portfolios
– LOS 52d: calculate and interpret the mean, variance, and covariance (or correlation) of asset returns based on historical data
– LOS 52e: explain risk aversion and its implications for portfolio selection
– LOS 52f: calculate and interpret portfolio standard deviation
– LOS 52g: describe the effect on a portfolio’s risk of investing in assets that are less than perfectly correlated
– LOS 52h: describe and interpret the minimum-variance and efficient frontiers of risky assets and the global minimum-variance portfolio
– LOS 52i: explain the selection of an optimal portfolio, given an investor’s utility (or risk aversion) and the capital allocation line

Reading 63– Portfolio Risk and Return: Part II

– LOS 53a: describe the implications of combining a risk-free asset with a portfolio of risky assets
– LOS 53b: explain the capital allocation line (CAL) and the capital market line (CML)
– LOS 53c: explain systematic and nonsystematic risk, including why an investor should not expect to receive additional return for bearing nonsystematic risk
– LOS 53d: explain return generating models (including the market model) and their uses
– LOS 53e: calculate and interpret beta
– LOS 53f: explain the capital asset pricing model (CAPM), including its assumptions, and the security market line (SML)
– LOS 53g: calculate and interpret the expected return of an asset using the CAPM
– LOS 53h: describe and demonstrate applications of the CAPM and the SML
– LOS 53i: calculate and interpret the Sharpe ratio, Treynor ratio, M², and Jensen’s alpha

Reading 64 – Basics of Portfolio Planning and Construction

– LOS 54a: describe the reasons for a written investment policy statement (IPS)
– LOS 54b: describe the major components of an IPS
– LOS 54c: describe risk and return objectives and how they may be developed for a client
– LOS 54d: distinguish between the willingness and the ability (capacity) to take risk in analyzing an investor’s financial risk tolerance
– LOS 54e: describe the investment constraints of liquidity, time horizon, tax concerns, legal and regulatory factors, and unique circumstances and their implications for the choice of portfolio assets
– LOS 54f: explain the specification of asset classes in relation to asset allocation
– LOS 54g: describe the principles of portfolio construction and the role of asset allocation in relation to the IPS
– LOS 54h: describe how environmental, social, and governance (ESG) considerations may be integrated into portfolio planning and construction.

Reading 65– The Behavioral Biases of Individuals

– LOS 52a: compare and contrast cognitive errors and emotional biases
– LOS 52b: discuss commonly recognized behavioral biases and their implications for financial decision making
– LOS 52c: describe how behavioral biases of investors can lead to market characteristics that may not be explained by traditional finance

Reading 66 – Introduction to Risk Management

– LOS 55a: define risk management
– LOS 55b: describe features of a risk management framework
– LOS 55c: define risk governance and describe elements of effective risk governance
– LOS 55d: explain how risk tolerance affects risk management
– LOS 55e: describe risk budgeting and its role in risk governance
– LOS 55f: identify financial and non-financial sources of risk and describe how they may interact
– LOS 55g: describe methods for measuring and modifying risk exposures and factors to consider in choosing among the methods

Reading 67 – Technical Analysis

– LOS 54a: explain principles and assumptions of technical analysis;
– LOS 54b: describe potential links between technical analysis and behavioral inance;
– LOS 54c: compare principles of technical analysis and fundamental analysis;
– LOS 54d: describe and interpret different types of technical analysis charts;
– LOS 54e: explain uses of trend, support, and resistance lines;
– LOS 54f: explain common chart patterns;
– LOS 54g: explain common technical indicators;
– LOS 54h: describe principles of intermarket analysis;
– LOS 54i. explain technical analysis applications to portfolio management.

Reading 68 – Fintech in Investment Management

– LOS 56a: describe “Fintech”
– LOS 56b: describe Big Data, Artificial Intelligence and Machine Learning
– LOS 56c: describe Fintech Applications to Investment Management
– LOS 56d: describe Financial Applications to Distributed Ledger Technology

2024 Curriculum

Portfolio Management (From Volume 2)

Learning Module 1 – Portfolio Risk and Return: Part I

– LOS a: describe characteristics of the major asset classes that investors consider in forming portfolios
– LOS b: explain risk aversion and its implications for portfolio selection
– LOS c: explain the selection of an optimal portfolio, given an investor’s utility (or risk aversion) and the capital allocation line
– LOS d: calculate and interpret the mean, variance, and covariance (or correlation) of asset returns based on historical data
– LOS e: calculate and interpret portfolio standard deviation
– LOS f: describe the effect on a portfolio’s risk of investing in assets that are less than perfectly correlated
– LOS g: describe and interpret the minimum-variance and efficient frontiers of risky assets and the global minimum-variance portfolio

Learning Module 2 – Portfolio Risk and Return: Part II

– LOS a: describe the implications of combining a risk-free asset with a portfolio of risky assets
– LOS b: explain the capital allocation line (CAL) and the capital market line (CML)
– LOS c: explain systematic and nonsystematic risk, including why an investor should not expect to receive additional return for bearing nonsystematic risk
– LOS d: explain return generating models (including the market model) and their uses
– LOS e: calculate and interpret beta
– LOS f: explain the capital asset pricing model (CAPM), including its assumptions, and the security market line (SML)
– LOS g: calculate and interpret the expected return of an asset using the CAPM
– LOS h: describe and demonstrate applications of the CAPM and the SML
– LOS i: calculate and interpret the Sharpe ratio, Treynor ratio, M², and Jensen’s alpha

Portfolio Management (From Volume 6)

Learning Module 1 – Portfolio Management: An Overview

– LOS a: describe the portfolio approach to investing
– LOS b: describe types of investors and distinctive characteristics and needs of each
– LOS c: describe defined contribution and defined benefit pension plans
– LOS d: describe the steps in the portfolio management process
– LOS e: describe aspects of the asset management industry
– LOS f: describe mutual funds and compare them with other pooled investment product

Learning Module 2 – Basics of Portfolio Planning and Construction

– LOS a: describe the reasons for a written investment policy statement (IPS)
– LOS b: describe the major components of an IPS
– LOS c: describe risk and return objectives and how they may be developed for a client
– LOS d: distinguish between the willingness and the ability (capacity) to take risk in analyzing an investor’s financial risk tolerance
– LOS e: describe the investment constraints of liquidity, time horizon, tax concerns, legal and regulatory factors, and unique circumstances and their implications for the choice of portfolio assets
– LOS f: explain the specification of asset classes in relation to asset allocation
– LOS g: describe the principles of portfolio construction and the role of asset allocation in relation to the IPS
– LOS h: describe how environmental, social, and governance (ESG) considerations may be integrated into portfolio planning and construction.

Learning Module 3– The Behavioral Biases of Individuals

– LOS a: compare and contrast cognitive errors and emotional biases
– LOS b: discuss commonly recognized behavioral biases and their implications for financial decision making
– LOS c: describe how behavioral biases of investors can lead to market characteristics that may not be explained by traditional finance

Learning Module 4 – Introduction to Risk Management

– LOS a: define risk management
– LOS b: describe features of a risk management framework
– LOS c: define risk governance and describe elements of effective risk governance
– LOS d: explain how risk tolerance affects risk management
– LOS e: describe risk budgeting and its role in risk governance
– LOS f: identify financial and non-financial sources of risk and describe how they may interact
– LOS g: describe methods for measuring and modifying risk exposures and factors to consider in choosing among the methods