- CFA Level 2: Portfolio Management – Introduction
- Mean-Variance Analysis Assumptions
- Expected Return and Variance for a Two Asset Portfolio
- The Minimum Variance Frontier & Efficient Frontier
- Diversification Benefits
- The Capital Allocation Line – Introducing the Risk-free Asset
- The Capital Market Line
- CAPM & the SML
- Adding an Asset to a Portfolio – Improving the Minimum Variance Frontier
- The Market Model for a Security’s Returns
- Adjusted and Unadjusted Beta
- Multifactor Models
- Arbitrage Portfolio Theory (APT) – A Multifactor Macroeconomic Model
- Risk Factors and Tracking Portfolios
- Markowitz, MPT, and Market Efficiency
- International Capital Market Integration
- Domestic CAPM and Extended CAPM
- Changes in Real Exchange Rates
- International CAPM (ICAPM) - Beyond Extended CAPM
- Measuring Currency Exposure
- Company Stock Value Responses to Changes in Real Exchange Rates
- ICAPM vs. Domestic CAPM
- The J-Curve – Impact of Exchange Rate Changes on National Economies
- Moving Exchange Rates and Equity Markets
- Impacts of Market Segmentation on ICAPM
- Justifying Active Portfolio Management
- The Treynor-Black Model
- Portfolio Management Process
- The Investor Policy Statement
CFA Level 2: Portfolio Management – Introduction
The portfolio management section contains a lot of material and much of it might never appear on the actual Level 2 test. Consider that this is one of the most in-depth study sessions from the official curriculum, but a candidate may only see one item set (six questions). That said much of this session’s content will resurface in Level 3.
Many of the concepts can seem abstract, so candidates are advised to review actual examples in preparation for the test.
Taking a zero on any item set is a setback, so candidates should obtain a general understanding of the material to ensure that some points will be obtained on the actual exam.
General guidance is to not get bogged down with it. Candidates do not want to take a zero on PM, but they do not want to over-invest as it is time to start reviewing other sessions and hitting the practice exams. Now is a good point for candidates to revisit their prep strategy and balance the amount of time left to exam day against topic strengths/weaknesses and topic weightings.
This module aligns with Study Session 18 material in the Level II CFA Program Curriculum ©.
I. Portfolio Concepts
II. Markowitz and Market Efficiency
III. International Asset Pricing
IV. Active Portfolio Management
V. PM Process and the IPS