Ethical and Professional Standards
Standards of Conduct With regard to the CFA Level 1 Standards of Conduct, there are seven areas by which one must be held accountable. Here, you will find a summary of the Standards with a relevant exam-style question at the end…
Introduction to Global Investment Performance Standards (GIPS)
GIPS Structure, Compliance with and Benefits from GIPS The Global Investment Performance Standards establish a standardized set of ethical practices that guide practitioners in analyzing and presenting historical data as a basis for the comparison of investment results. These standards…
The GIPS Standards
Features of GIPS, and Compliance The investment industry is increasingly global in nature. For both firms and clients, there is a benefit to adopting a standardized protocol for calculating and presenting performance data. By adopting GIPS, firms in countries with…
Types of Security Market Indices
Investors can choose from security market indices representing various asset classes, including equity, fixed-income, commodity, real estate, and hedge fund indices. While proper use of any index is dependent on understanding their construction and management, it is also important to…
Market Efficiency
Market efficiency describes the extent to which available information is quickly reflected in the market price. Market efficiency is highly important to active investment managers as their advantage depends on exploiting market inefficiencies and earning excess risk-adjusted returns. Investment officers…
Factors that Affect a Market’s Efficiency
Most, if not all, markets can be thought of as existing on a spectrum between perfect efficiency and complete inefficiency. This is because several factors contribute to or impede the efficiency of a market, including market participants, information availability and…
Weak, Semi-strong, and Strong Forms Market Efficiency
Eugene Fama developed a framework of market efficiency that laid out three forms of efficiency: weak, semi-strong, and strong. Each form is defined with respect to the available information that is reflected in prices. Investors trading on available information that…
Market Efficiency for Fundamental Analysis
The table below shows if abnormal returns can be earned through various strategies and active management assuming different types of market efficiency. $$ \begin{array}{l|cccc} \textbf{} & \textbf{Technical Analysis} & \textbf{Fundamental Analysis} & \textbf{Insider Trading} & \textbf{Active Management} \\ \hline \textbf{Weak}…
Market Anomalies
Market anomalies are exceptions to the notion of market efficiency. They may be present if a change in the price of an asset or security cannot directly be linked to current relevant information known in the market. Market anomalies are…
Behavioral Finance
Behavioral finance examines investor behavior to understand how people make decisions, individually and collectively. Behavioral finance does not assume that investors always act rationally but instead that people can be negatively affected by behavioral biases. Market efficiency does not require…
