CFA Exam Preparation Notes - Quant Methods and Economics

Kaplan Schweser’s Path to Success

  • Kaplan Schweser has decades of experience in CFA prep.

  • SchweserNotes cover all CFA curriculum topics, divided into manageable modules.

Core Product Features

  • SchweserNotes: Bite-sized modules with interspersed quizzes.

  • Online Quizzes: Assess comprehension at the end of topics.

  • LMS Dashboard: Track progress, access materials, and receive motivation.

Key Concepts in Quantitative Methods and Economics

1. Rates and Returns

  • Interest Rates: Measured as required rates of return, discount rates.

  • Holding Period Return (HPR): Percentage increase in investment value.

  • Money-Weighted vs Time-Weighted Returns: Evaluation methods for portfolios.

2. The Time Value of Money

  • Present Value (PV): Future cash flows discounted to present value.

  • Growth and Cash Flow: Implied returns based on future cash flows.

3. Statistical Measures of Asset Returns

  • Central Tendency: Measures like mean, median, and mode.

  • Dispersion Measures: Variance and standard deviation.

4. Probability Trees and Conditional Expectations

  • Probability Models: Expected outcomes based on calculated probabilities.

  • Bayes' Formula: Updates probabilities with new information.

5. Portfolio Mathematics

  • Expected Portfolio Return: Weighted sums of individual asset returns.

  • Covariance and Correlation: Relationship between asset returns.

6. Simulation Methods

  • Lognormal Distributions: Modeling asset prices using continuously compounded returns.

  • Monte Carlo Simulation: Used to model risk factors in financial investments.

7. Estimation and Inference

  • Different sampling techniques affect variability and estimation.

8. Hypothesis Testing

  • Null vs Alternative Hypotheses: Framework for making statistical inferences.

  • Type I and II errors: Risks in testing hypotheses.

9. Tests of Independence

  • Chi-square Tests: For analyzing categorical data relationships.

10. Simple Linear Regression

  • Regression Analysis: Intercept and slope inform relationships between variables.

  • ANOVA: Analyzes variability and fits within regression analysis.

11. Introduction to Big Data Techniques

  • Fintech: Involves technologies applied to finance.

  • Big Data: Volume, velocity, and variety of data affecting finance.

12. Firms and Market Structures

  • Different structures (perfect competition, monopolistic competition, oligopoly, monopoly) affect pricing strategies and market outcomes.

13. Understanding Business Cycles

  • Phases: Expansion, peak, contraction, trough - affect economic indicators.

14. Fiscal Policy

  • Tools and implications of fiscal policy in economic management.

15. Monetary Policy

  • Thrives on managing the money supply and controlling inflation through interest rates.

16. Geopolitics and Globalization

  • Relations defining cooperation vs competition between nations impacting economics.