Book 1 Completed!

I finally finished the first book (and 3rd study session) on Tuesday. Reading 11 was quite long and involved hypothesis testing. The tests seem quite similar to each other in respect to the steps you take to find the answer but I will need to revise it again soon because I only got 67% for the end of chapter questions :(

Reading 12 was interesting to read because it was about technical analysis. But since I believe in the efficient market hypothesis, I don't think it will be that useful. I can't imagine many questions coming up in the exam on this since whether you can be successful with these techniques are debatable.

I started economics today and reading 13 was on elasticity which I learned in econ201. I breezed through it quickly and checked out the other readings. They all seem short compared to the previous readings (only around 20 pages each) so I think it will be easy to do a reading a day for the next couple of weeks.

The June level 1 results came out today and only 35% of people passed. I hope you were one of them if you sat it. It seems very low but I believe I can be one of the few who do pass this December. Mainly because I have a solid study schedule now with the aim to finish going through the curriculum by the start of October. I also study at university (as opposed to working) and the subjects I'm taking will complement my CFA study. I think this gives me a strong advantage over the other candidates.

130 days until the level 1 exam.

Long time no post

Hi. I haven't written in this for a while. It's because I've finally settled into a good study routine with university courses as well as CFA curriculum study. I think it is a good routine and it involves doing the previous reading questions in the morning, then a new reading in the afternoon. At night I plan to do questions from analyst notes for a topic, but if I don't get around to it, it's no big deal since I can easily make it up later. Hopefully I can do 5 readings a week with this schedule but it means I wont finish the readings by the start of October :( Hopefully I will still be alright, I think I will still have enough time to do plenty of revision and exams before the exam.

Last week I finished reading 8 and so far this week I've completed readings 9 and 10. Reading 8 contained a lot of probability concepts (that's the title of the reading after all) and the most interesting was Bayes formula. It says you can update your calculated probabilities when you receive new information which will affect those probabilities:

Updated probability of event given the new information = (probablility of the new information, given the event/unconditional probability of the new information) * the prior probablity of the event

or: P(Event\Information) = P(Information\Event)/P(Information) * P(Event)

This reading was quite difficult because there were lots of different probability equations to remember. I will have to review these a few times in the future..

Reading 9 was concerned with probability distributions. By far, the most interesting concept introduced was Monte Carlo simulation which is a risk analysis technique in which probable future events are simulated on a computer. You use this to test scenarios before you actually perform it. This way you have a general idea of what may happen. The reading used an example of whether it could be profitable to trade based on the investor's ability to time the markets. The Monte Carlo simulation concluded you need to be able to predict at least 80% of the time whether the market in a given year will be a bull market or a bear one. Do you think you could do this?

Reading 10 is mainly dealing with sampling and constructing confidence intervals. There was nothing that interesting bought up in this reading but data-mining bias is something new I learnt about. This occurs when a dataset is searched through to find statistically significant patterns. When this bias exists, it's very unlikely the model will have any predictive power. So it's important to be able to spot situations where this exists.

I also did two basic question tests. I got 8/10 for responsibilities as a CFAI member or candidate, and an abysmal 5/17 (30%) for GIPS. I need to do a lot of revision on that.

137 days until the level 1 exam.

Bad News

Today I was meant to do reading 8 but I didn't. I spent a lot of time doing the reading 7 revision questions. I think it was mainly because I haven't learnt how to input data sets into my calculator yet. This caused me to spend the majority of my time pressing buttons to find the means and standard deviations. I stopped before I finished all the questions and in the weekend I'll learn how to use my calculator for this and finish them.

On a positive note, I did questions on the professional standards relating to investment analysis and got 5 of the 6 questions right (83%). I have a lot to make up now..

158 days until the level 1 exam.

A lot of work

Today I understood why we were given postcards to give to friends and family so they know why you will spend hardly any time with them for a couple of years...there is ALOT to cover. Not only do you have to study it, you have to learn the material to the degree where you've 'mastered' (as stalla puts it) it. You must be able to recall all the required knowledge for the test and answer the questions within the time given.

I finally comprehended the amount of study required when I did reading 7 today. There were 9 learning objectives for it, and it took a good 4-5 hours to get through it all. It was all statistics and even though I did the stats course required for university, there was a few more points that the CFA covers..

The sharpe ratio is probably the most interesting one (I can't remember if I learnt this in finance 362 or not). The formula for it is

S_h = (R_p – R_{f )/}S_p 

R_p is the mean portfolio return, R_f is the mean return on the risk free asset, and S_p  is the standard deviation of the return on the portfolio. The sharpe ratio gives you the return above the risk free rate on each unit of standard deviation. So this is a good formula to use when you want to measure the performance of the asset.

I just completed some basic questions regarding duties to employers. I got 11/13 which I'm very happy with. With the first couple of questions I didn't spend enough time reading them (I was lucky to get one of them right!). I need to make sure I read the questions carefully from now on. Every mark counts!

I did some questions yesterday on duties to clients/prospective clients and only got 14/24. I will have to review that section in the weekend.

159 days until the level 1 exam.