Volume 4 Reading 25 page 501,
Solution to 2 - why is coefficient 0.733 being used in this CV formula instead of asset weight?
Strike out asset, write in factor.
so how to understand the curriculum specifically says Xj = the asset’s weight in the portfolio (both on page 501 and page 492)
They’re conscripting the asset-weight formula to use as a factor-weight formula without telling you.
The question doesn’t ask about assets; it asks about factors. So . . . you treat factors like assets and use the asset-weight formula.
It’s underhanded, but there you go.
aha! this could be an exam question then?
Now that you understand it it won’t be an exam question for you, but it will be for everyone who doesn’t understand it.
CFA Institute knows.
agree