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CFA Self Study > Secret Sauce Review > Flashcards

Secret Sauce Review Flashcards

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CFA flashcards
1
Q

Standard Error of Sample Mean eqn & explain

A

STDV/ SQR root of n

Essentially the standard deviation of the means of the sample

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2
Q

Confidence Interval (Simple) explanation

A

mean value plus/ minus the corresponding Z score times the standard error

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3
Q

Shortfall Risk is the risk that

A

a portfolios return will be below the targer return

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4
Q

SFR states that

A

a portfolio should minimize the risk of the return underpreforming

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5
Q

Continuously compounded Returns (CCR) eqn

A

Ln(1 +HPR) = Ln(end value/beg. value)

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6
Q

Data mining bias

A

when research is based off other research, instead of testable economic theory

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7
Q

Survivorship Bias

A
  • Most databases only include firms that are still in existance ie survived
  • Most Common Bias
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8
Q

When to use a two tailed test?

A

to se if the parameter is different from a specified value

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9
Q

When to use a one tailed test?

A

to see if something is ABOVE or BELOW a specified value

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10
Q

Most Common test statistics

A

t-statistic and z-statistic

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11
Q

Type I error

A

False rejection of the null hypothesis

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12
Q

Type II error

A

Failure to reject the null when it is actually false

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13
Q

What is the Significant Level?

A

the probability of making a Type I error

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14
Q

Change in Polarity Principal

A

support levels that bave been broken become resistance levels & vice versa

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15
Q

Moving Line Averages

A
  • arithmetic mean of the last X days of closing prices

- Used to smooth fluctuation in a price chart

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16
Q

Bollinger Bands

A

drawn with a given number of STDVs above and below a moving average line.
Prices are believed to fall when the reach the upper band.

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17
Q

A negitive coefficient on income in a demand function denotes

A

that the good is inferior

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18
Q

English Auction

A

ascending price auction, highest bid wins the item

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19
Q

Vickrey Auction

A

highest bid wins the item, but pays the next highest bid amount

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20
Q

Dutch Auction

A

Price is reduced until a bidder is willing to pay the price

21
Q

Substitution effect is

A

always positive

22
Q

Giffen Good

A

decrease in price leads to a decrease in Qd

-Supported by theory

23
Q

Veblen Good

A

an increase in price causes an increase in value to some consumers

24
Q

Explicit Costs

A

accounting expenses that are deducted on the income statement

25
Q

Implicit Costs

A

used in calculating economic profit, includes opportunity costs

26
Q

Price Searcher

A

firm facing a downward sloping demand curve

27
Q

Marginal cost Equation

A

change in total cost / change in output

28
Q

Breakeven Point

A

Price where ATC and MC intersect

29
Q

Shutdown point

A

Price where AVC and MC intersect

30
Q

Minimum effieient scale

A

lowest point on a LRATC

31
Q

Input levels and profit maxing

A

MPn/ Pn, meaning that additional output per dollar spent to employ an additional unit of each input must be the same

32
Q

Marginal Revenue Product

A

marginal product * marginal revenue from selling the additional output unit

33
Q

HHI

A

The sum of all the squares of market shares

34
Q

Under PC, where is a firms long run supply curve

A

MC curve above the ATC curve

35
Q

GDP Equation

A

GDP= C + I + G + (X - M)

36
Q

How to finance a fiscal deficit

A

some combination of a trade deficit or an excess of private savings

37
Q

Aggergate Demand Curve composition

A

AD curve is made up of IS &LM intersections at different price levels

38
Q

LRAS cure

A

perfectly inelastic (vertical)

39
Q

Recessionary Gap

A

When AD falls below the LRAS

40
Q

Inflationary Gap

A

When AD increases beyond the LRAS

41
Q

4 business cycles

A

Expansion
Peak
Contraction (recession)
Trough

42
Q

Frictional Unemployment

A

comes from the time lag to match employees with employers

43
Q

Structural Unemployment

A

caused by long run changes that eliminate certain jobs

44
Q

Cyclical Unemployment

A

Caused by general changes in economic activity levels.

45
Q

Participation ratio

A

the percentage of working age population who are employed or seeking employment

46
Q

Inflation rate

A

percentage in crease in price level, typically compared to the prior year

47
Q

Price Index

A

measures the total cost of a specific basket of goods relative to its cost in a prior period

48
Q

Core Inflation

A

calculated excluding food and energy prices due to their volitility

CFA Self Study (6 decks)

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