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…
Industry Analysis
Effective industry analysis helps to provide a framework for company analysis. Uses of Industry Analysis Understanding a company’s business and business environment: a critical step in stock valuation and credit analysis Identifying active equity investment opportunities: helps active investors with…
Industry Classification Systems
Industry classification attempts to place companies into groups based on commonalities. There are three major approaches to industry classification. Current Industry Classification Systems Commercial Industry Classification Systems Global Industry Classification Standard: developed by Standard & Poor’s and MSCI Barra. Each…
Factors that Affect Sensitivity to Business Cycles
Sensitivity Factors A cyclical company is likely to experience wider-than-average fluctuations in demand, high demand in economic expansion, and low demand in economic contraction. It may be subject to greater-than-average profit variability related to high operating leverage. Non-cyclical companies produce…
Elements Covered in a Thorough Industry Analysis
Thorough industry analysis will often split the industry into strategic groups (groups sharing distinct business models or catering to specific market segments in an industry). The analysis will likely involve identifying the industry’s life-cycle, usually placing the industry somewhere along…
Company’s Cost of Equity
Required rates of return describe the reward investors expect from taking on a given level of risk. Cost of Equity The cost of equity is the minimum return a company must offer to attract investors and keep its share price…
Dividends, Stock Splits, and Share Repurchases
According to the dividend discount model (DDM), the value of an investment should be equal to the present value of the expected future benefits. For common shares, these benefits come in the form of dividends and the expected capital gain…
