we do need to memorize that formula where u find weights to allocate to Active portfolio? hope not
Nope
Just understand how the process works.
I’d recommend knowing the formula for the weighting… it’s very simple and small…and easily testable
CFA states we don’t need to memorize the TB formulas (thankfully). This is stated on the first page of reading 69.
wicked, never realized. thanks
yeah, the whole TB formula takes forever, it would be ridiculous to make a problem where you gotta solve it all the way through.
it would actually make me laugh to see it tho; ITEM SET 7 Here’s a table of 6 assets with their corresponding factor sensitivities, betas, and variances. According to the TB method, calculate each one’s active risk, then their weights in the active portfolio, then the return of the active portfolio, then the proportion of portfolio that is active vs passive, then the resulting return. Go.
Oh damn it…i knew this one well. Thanks anyways.