Distinguishing between cognitive and emotional bias is not always a binary process. Some biases manifest elements of both cognitive and emotional aspects. Categorizing biases as cognitive or emotional is useful to analysts and advisors in answering the question of…

 Mnemonic Devices for Easy Recall Cognitive: Use the following mnemonic device to remind yourself of cognitive biases: Con-Con-Con-Rep-Hind + FAMA (think Fama and French). Emotional: To remember emotional biases, use the following mnemonic device: LESSOR (the owner of an…

Mnemonic Devices for Easy Recall Cognitive: The cognitive biases can be remembered with the following mnemonic device: Con-Con-Con-Rep-Hind + FAMA (think Fama and French). Emotional: The emotional biases can be remembered with the following mnemonic device: LESSOR (the owner of…

Reading 1: The Behavioral Biases of Individuals -a. Compare and contrast cognitive errors and emotional biases; -b. Discuss commonly recognized behavioral biases and their implications for financial decision making; -c. Identify and evaluate an individual’s behavioral biases; Reading 2: Behavioral…

Reading 1: Capital Market Expectations – Part 1 (Framework and Macro Considerations) Los 1 a: Discuss the role of, and a framework for, capital market expectations in the portfolio management process Los 1 b: Discuss challenges in developing capital market…

Reading 5: Overview of Asset Allocation -a. Describe elements of effective investment governance and investment governance considerations in asset allocation; -b. Describe elements of effective investment governance and investment governance considerations in asset allocation; -c. Compare the investment objectives of…

A goals-based asset allocation process combines into an overall portfolio numerous sub-portfolios, each designed to fund a single goal within its time horizon and required probability of success. Individuals have unique needs that differ from those of institutions. The critical…

Aside from the well-known asset-only approach to asset allocation, other options are available to financial professionals. Another lens to view asset allocation involves thinking not of an already constructed portfolio of assets but first viewing the liabilities under the portfolio’s…

Rebalancing as a Discipline After choosing a strategic asset allocation, portfolios will drift away from those allocations as market conditions change and affect the relative weights of investments within a portfolio. One choice is clearly to ‘do nothing,’ also known…

 The Economic Balance Sheet An economic balance sheet is a snapshot in time of an investor’s assets and liabilities. But rather than just capturing physical and/or financial assets, as does the traditional balance sheet, the economic balance sheet also…