Tải bản đầy đủ

CFA 2017 Level 1 Schweser Notes Book 1



Table of Contents
1.
2.
3.
4.

Getting Started Flyer
Reading Assignments and Learning Objectives
Welcome to the 2017 SchweserNotes™
Ethics and Trust in the Investment Profession
1. Exam Focus
2. LOS 1.a
3. LOS 1.b
4. LOS 1.c
5. LOS 1.d
6. LOS 1.e
7. LOS 1.f
8. Key Concepts
1. LOS 1.a

2. LOS 1.b
3. LOS 1.c
4. LOS 1.d
5. LOS 1.e
6. LOS 1.f
9. Concept Checkers
10. Answers – Concept Checkers
5. Code of Ethics and Standards of Professional Conduct
1. Exam Focus
2. LOS 2.a
3. LOS 2.b
4. Code of Ethics
5. The Standards of Professional Conduct
6. LOS 2.c
7. Standards of Professional Conduct
6. Guidance for Standards I-VII
1. Exam Focus
2. Standards of Practice
3. LOS 3.a
4. LOS 3.b
5. LOS 3.c
6. Standard I: Professionalism
7. Standard II: Integrity of Capital Markets
8. Standard III: Duties to Clients
9. Standard IV: Duties to Employers
10. Standard V: Investment Analysis, Recommendations, and Actions
11. Standard VI: Conflicts of Interest
12. Standard VII: Responsibilities as a CFA Institute Member or CFA Candidate
13. Concept Checkers
14. Answers – Concept Checkers
7. Introduction to the Global Investment Performance Standards (GIPS)
1. Exam Focus
2. LOS 4.a
3. LOS 4.b


4. LOS 4.c
8. The GIPS Standards
1. LOS 5.a
2. LOS 5.b


3. LOS 5.c
4. LOS 5.d
5. Concept Checkers
6. Answers – Concept Checkers
9. Self-Test: Ethics and Professional Standards
10. The Time Value of Money
1. Exam Focus
2. Time Value of Money Concepts and Applications
3. LOS 6.a
4. LOS 6.b
5. LOS 6.c
6. LOS 6.d
7. LOS 6.e
8. LOS 6.f
9. Key Concepts
1. LOS 6.a
2. LOS 6.b
3. LOS 6.c
4. LOS 6.d
5. LOS 6.e
6. LOS 6.f
10. Concept Checkers
11. Answers – Concept Checkers
12. Challenge Problems
13. Answers – Challenge Problems
11. Discounted Cash Flow Applications
1. Exam Focus
2. LOS 7.a
3. LOS 7.b
4. LOS 7.c
5. LOS 7.d
6. LOS 7.e
7. LOS 7.f
8. Key Concepts
1. LOS 7.a
2. LOS 7.b
3. LOS 7.c
4. LOS 7.d
5. LOS 7.e
6. LOS 7.f
9. Concept Checkers
10. Answers –Concept Checkers
11. Challenge Problems
12. Answers – Challenge Problems
12. Statistical Concepts and Market Returns
1. Exam Focus
2. LOS 8.a
3. LOS 8.b


4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.

LOS 8.c
LOS 8.d
LOS 8.e
LOS 8.f
LOS 8.g
LOS 8.h
LOS 8.i
LOS 8.j
LOS 8.k
LOS 8.l
LOS 8.m
Key Concepts
1. LOS 8.a
2. LOS 8.b
3. LOS 8.c
4. LOS 8.d
5. LOS 8.e
6. LOS 8.f
7. LOS 8.g
8. LOS 8.h
9. LOS 8.i
10. LOS 8.j
11. LOS 8.k
12. LOS 8.l
13. LOS 8.m
16. Concept Checkers
17. Answers – Concept Checkers
18. Challenge Problems
19. Answers – Challenge Problems
13. Probability Concepts
1. Exam Focus
2. LOS 9.a
3. LOS 9.b
4. LOS 9.c
5. LOS 9.d
6. LOS 9.e
7. LOS 9.f
8. LOS 9.g
9. LOS 9.h
10. Expected Value
11. LOS 9.i
12. LOS 9.j
13. LOS 9.k
14. LOS 9.l
15. LOS 9.m
16. LOS 9.n
17. LOS 9.o
18. Key Concepts
1. LOS 9.a
2. LOS 9.b
3. LOS 9.c
4. LOS 9.d


5. LOS 9.e
6. LOS 9.f
7. LOS 9.g
8. LOS 9.h
9. LOS 9.i
10. LOS 9.j
11. LOS 9.k
12. LOS 9.l
13. LOS 9.m
14. LOS 9.n
15. LOS 9.o
19. Concept Checkers
20. Answers – Concept Checkers
21. Challenge Problems
22. Answers – Challenge Problems
14. Common Probability Distributions
1. Exam Focus
2. LOS 10.a
3. LOS 10.b
4. LOS 10.
5. LOS 10.d
6. LOS 10.e
7. LOS 10.f
8. LOS 10.g
9. LOS 10.h
10. LOS 10.i
11. LOS 10.j
12. LOS 10.k
13. LOS 10.l
14. LOS 10.m
15. LOS 10.n
16. LOS 10.o
17. LOS 10.p
18. LOS 10.q
19. LOS 10.r
20. Key Concepts
1. LOS 10.a
2. LOS 10.b
3. LOS 10.c
4. LOS 10.d
5. LOS 10.e
6. LOS 10.f
7. LOS 10.g
8. LOS 10.h
9. LOS 10.i
10. LOS 10.j
11. LOS 10.k
12. LOS 10.l
13. LOS 10.m
14. LOS 10.n
15. LOS 10.o
16. LOS 10.p


17. LOS 10.q
18. LOS 10.r
21. Concept Checkers
22. Answers – Concept Checkers
23. Challenge Problems
24. Answers – Challenge Problems
15. Sampling and Estimation
1. Exam Focus
2. Applied Statistics
3. LOS 11.a
4. LOS 11.b
5. LOS 11.c
6. LOS 11.d
7. LOS 11.e
8. LOS 11.f
9. LOS 11.g
10. LOS 11.h
11. LOS 11.i
12. LOS 11.j
13. LOS 11.k
14. Key Concepts
1. LOS 11.a
2. LOS 11.b
3. LOS 11.c
4. LOS 11.d
5. LOS 11.e
6. LOS 11.f
7. LOS 11.g
8. LOS 11.h
9. LOS 11.i
10. LOS 11.j
11. LOS 11.k
15. Concept Checkers
16. Answers – Concept Checkers
17. Challenge Problems
18. Answers – Challenge Problems
16. Hypothesis Testing
1. Exam Focus
2. Hypothesis Testing
3. LOS 12.a
4. LOS 12.b
5. LOS 12.c
6. LOS 12.d
7. LOS 12.e
8. LOS 12.f
9. LOS 12.g
10. LOS 12.h
11. LOS 12.i
12. LOS 12.j
13. LOS 12.k
14. Key Concepts
1. LOS 12.a


17.

18.
19.
20.
21.
22.
23.
24.
25.
26.

2. LOS 12.b
3. LOS 12.c
4. LOS 12.d
5. LOS 12.e
6. LOS 12.f
7. LOS 12.g
8. LOS 12.h
9. LOS 12.i
10. LOS 12.j
11. LOS 12.k
15. Concept Checkers
16. Answers – Concept Checkers
17. Challenge Problems
18. Answers – Challenge Problems
Technical Analysis
1. Exam Focus
2. LOS 13.a
3. LOS 13.b
4. LOS 13.c
5. LOS 13.d
6. LOS 13.e
7. LOS 13.f
8. LOS 13.g
9. LOS 13.h
10. Key Concepts
1. LOS 13.a
2. LOS 13.b
3. LOS 13.c
4. LOS 13.d
5. LOS 13.e
6. LOS 13.f
7. LOS 13.g
8. LOS 13.h
11. Concept Checkers
12. Answers – Concept Checkers
Self-Test: Quantitative Methods
Formulas
Appendix A: Areas Under The Normal Curve
1. Cumulative Z-Table
Appendix B: Student’s t-Distribution
Appendix C: F-Table at 5 Percent (Upper Tail)
Appendix D: F-Table at 2.5 Percent (Upper Tail)
Appendix E: Chi-Squared table
Copyright
Pages List Book Version


BOOK 1 – ETHICAL AND PROFESSIONAL STANDARDS AND QUANTITATIVE
METHODS
Reading Assignments and Learning Outcome Statements
Study Session 1 – Ethical and Professional Standards
Study Session 2 – Quantitative Methods: Basic Concepts
Study Session 3 – Quantitative Methods: Application
Formulas
Appendices


WELCOME TO THE 2017 SCHWESERNOTES™
Thank you for trusting Kaplan Schweser to help you pass the Level I CFA exam. Please take a moment
to read about how our program materials fit together provide a comprehensive study solution.
Candidates find our Candidate Resource Library video “How to Pass the Level I CFA Exam” very
helpful in both planning and executing a successful study strategy. In it we explain the structure of
the exam, the question format, and topic weights, and offer advice on study techniques and how to
create an effective plan for exam success.
Candidates typically begin with study of the Level I CFA Curriculum. Our five books of
SchweserNotes cover every Learning Outcome Statement required for the Level I exam with clear
explanations, examples, and practice questions.
After studying a reading or group of readings, candidates get good results by doing questions based
on those readings from SchweserPro QBank, our online question bank of over 4,000 questions. Over
the course of study you should periodically take additional quizzes from the QBank on topics you
previously studied to improve your retention of that material through exam day. This also allows you
to further improve your knowledge and understanding by reviewing the SchweserNotes for areas in
which you do not do well in the quizzes.
Our On-Demand Video Lectures are typically available for the entire Level I curriculum when we
begin shipping SchweserNotes, so that they can be used by those who begin their study early in the
season (highly recommended). They offer instruction covering every required Learning Outcome
Statement and, for many candidates, they are an important supplement to the written
SchweserNotes.
Our live online classes for the June exam begin in October for candidates who want to start their
study early. In January we offer three different live weekly online classes, presented in the evening
based on New York time, London time, or Hong Kong time. All of our live online classes are archived
and available on-demand through the exam date for those who prefer a different day or time of day
for their classes. Although they cover essentially the same material as the video lectures, the live
classes offer more integration of the curriculum material, more practice questions, and more
instruction focused on exam preparation and the ways the material may be tested.
If you prefer live classroom instruction, Schweser, its partner CFA Societies, and international
distributors offer classes in major cities worldwide. A comprehensive list is available on our website.
Note that we do not cover Ethics (Study Session #1) in our live classes but it is covered in our ondemand video lectures. Candidates are expected to read the Standards of Practice Handbook (all of
it, including all the examples) multiple times in order to do well on the Level I exam, which will have
36 questions (15% of the exam) from Study Session #1. A lot of this material is simply memorization
and our candidates have done very well following this strategy.
Classes for the June exam conclude by the end of April, and for the December exam by the end of
October, to allow a full month for exam practice and review. This is a very important part of
preparing to pass your Level I exam. While QBank questions are typically based on a single LOS and
designed to help you understand and retain the curriculum material, our Practice Exams Volumes 1
and 2 are as close to the actual exam as we can make them in terms of topic weights, question
format, timing, and difficulty. By using our online analytics you can get important feedback on how
well prepared you are in each topic area. This will help guide your review and improve your
performance on subsequent exams.
At the beginning of your practice and review, or after taking a Practice Exam or two, you can benefit
from our 101 Must Knows for the Level I CFA exam. There are 101 online questions but it is not a
test, you can attempt them at any pace. Each question includes a multimedia tutorial with a targeted
review of the underlying definitions, concepts, and techniques from the curriculum necessary to


answer the question. Some are short and some are quite detailed, but all cover material that we
believe is crucial to exam success.
A couple weeks before the actual exam day, the Schweser Mock Exam is presented in live classroom
settings in over 100 locations around the world (and also online) to give you real practice in a setting
similar to what you will experience on exam day. You can get analysis of your performance by topic
areas and a multimedia tutorial explaining the solution to each question online at Schweser.com.
I would like to thank Craig Prochaska, CFA who, as my assistant, has been invaluable in the
preparation of all our Level I study materials and candidate support over the last 10 years. He and I
will be answering your questions throughout the exam season. Thanks Craig.
Wishing you all the best and great success in your studies,
Doug Van Eaton
Doug Van Eaton, PhD, CFA
SVP for CFA Education
Kaplan Schweser/Kaplan Professional Education


READING A SSIGNMENTS AND
LEARNING OUTCOME S TATEMENTS
The following material is a review of the Ethical and Professional Standards and Quantitative
Methods principles designed to address the learning outcome statements set forth by CFA Institute.

STUDY SESSION 1
Reading A ssignments

Ethical and Professional Standards and Quantitative Methods, CFA Program Level I 2017
Curriculum (CFA Institute, 2016)
1. Ethics and Trust in the Investment Profession (page 1)
2. Code of Ethics and Standards of Professional Conduct (page 8)
3. Guidance for Standards I–VII (page 14)
4. Introduction to the Global Investment Performance Standards (GIPS®) (page 43)
5. The GIPS Standards (page 45)

STUDY SESSION 2
Reading A ssignments

Ethical and Professional Standards and Quantitative Methods CFA Program Level I 2017 Curriculum
(CFA Institute, 2016)
6. The Time Value of Money (page 54)
7. Discounted Cash Flow Applications (page 96)
8. Statistical Concepts and Market Returns (page 120)
9. Probability Concepts (page 159)

STUDY SESSION 3
Reading A ssignments

Ethical and Professional Standards and Quantitative Methods CFA Program Level I 2017 Curriculum
(CFA Institute, 2016)
10. Common Probability Distributions (page 203)
11. Sampling and Estimation (page 240)
12. Hypothesis Testing (page 264)
13. Technical Analysis (page 304)

L EARNI NG O UTCOME S TATEMENTS (LOS)

STUDY SESSION 1
The topical coverage corresponds with the following CFA Institute assigned reading:
1 . Ethics and Tr ust in the Investment Pr ofesssion
The candidate should be able to:
a. explain ethics. (page 1)
b. describe the role of a code of ethics in defining a profession. (page 1)


c. identify challenges to ethical behavior. (page 2)
d. describe the need for high ethical standards in the investment industry. (page 2)
e. distinguish between ethical and legal standards. (page 3)
f. describe and apply a framework for ethical decision making. (page 3)
The topical coverage corresponds with the following CFA Institute assigned reading:
2 . Code of Ethics and Standar ds of Pr ofessional Conduct
The candidate should be able to:
a. describe the structure of the CFA Institute Professional Conduct Program and the process for the enforcement of the
Code and Standards. (page 8)
b. state the six components of the Code of Ethics and the seven Standards of Professional Conduct. (page 9)
c. explain the ethical responsibilities required by the Code and Standards, including the sub-sections of each Standard.
(page 10)
The topical coverage corresponds with the following CFA Institute assigned reading:
3 . Guidance for Standar ds I–VII
The candidate should be able to:
a. demonstrate the application of the Code of Ethics and Standards of Professional Conduct to situations involving issues
of professional integrity. (page 14)
b. distinguish between conduct that conforms to the Code and Standards and conduct that violates the Code and
Standards. (page 14)
c. recommend practices and procedures designed to prevent violations of the Code of Ethics and Standards of
Professional Conduct. (page 14)
The topical coverage corresponds with the following CFA Institute assigned reading:
4 . Intr oduction to the Global Investment Per for mance Standar ds (GIPS® )
The candidate should be able to:
a. explain why the GIPS standards were created, what parties the GIPS standards apply to, and who is served by the
standards. (page 43)
b. explain the construction and purpose of composites in performance reporting. (page 44)
c. explain the requirements for verification. (page 44)
The topical coverage corresponds with the following CFA Institute assigned reading:
5 . The GIPS Standar ds
The candidate should be able to:
a. describe the key features of the GIPS standards and the fundamentals of compliance. (page 45)
b. describe the scope of the GIPS standards with respect to an investment firm’s definition and historical performance
record. (page 47)
c. explain how the GIPS standards are implemented in countries with existing standards for performance reporting and
describe the appropriate response when the GIPS standards and local regulations conflict. (page 47)
d. describe the nine major sections of the GIPS standards. (page 47)

STUDY SESSION 2
The topical coverage corresponds with the following CFA Institute assigned reading:
6 . The Time Value of Money
The candidate should be able to:
a. interpret interest rates as required rates of return, discount rates, or opportunity costs. (page 56)
b. explain an interest rate as the sum of a real risk-free rate and premiums that compensate investors for bearing distinct
types of risk. (page 56)
c. calculate and interpret the effective annual rate, given the stated annual interest rate and the frequency of
compounding. (page 57)
d. solve time value of money problems for different frequencies of compounding. (page 59)
e. calculate and interpret the future value (FV) and present value (PV) of a single sum of money, an ordinary annuity, an
annuity due, a perpetuity (PV only), and a series of unequal cash flows. (page 59)
f. demonstrate the use of a time line in modeling and solving time value of money problems. (page 74)
The topical coverage corresponds with the following CFA Institute assigned reading:
7 . Discounted Cash Flow A pplications
The candidate should be able to:
a. calculate and interpret the net present value (NPV) and the internal rate of return (IRR) of an investment. (page 96)
b. contrast the NPV rule to the IRR rule, and identify problems associated with the IRR rule. (page 99)
c. calculate and interpret a holding period return (total return). (page 101)
d. calculate and compare the money-weighted and time-weighted rates of return of a portfolio and evaluate the
performance of portfolios based on these measures. (page 101)


e. calculate and interpret the bank discount yield, holding period yield, effective annual yield, and money market yield for
US Treasury bills and other money market instruments. (page 105)
f. convert among holding period yields, money market yields, effective annual yields, and bond equivalent yields. (page
108)
The topical coverage corresponds with the following CFA Institute assigned reading:
8 . Statistical Concepts and Mar ket Retur ns
The candidate should be able to:
a. distinguish between descriptive statistics and inferential statistics, between a population and a sample, and among the
types of measurement scales. (page 120)
b. define a parameter, a sample statistic, and a frequency distribution. (page 121)
c. calculate and interpret relative frequencies and cumulative relative frequencies, given a frequency distribution. (page
123)
d. describe the properties of a data set presented as a histogram or a frequency polygon. (page 126)
e. calculate and interpret measures of central tendency, including the population mean, sample mean, arithmetic mean,
weighted average or mean, geometric mean, harmonic mean, median, and mode. (page 127)
f. calculate and interpret quartiles, quintiles, deciles, and percentiles. (page 132)
g. calculate and interpret 1) a range and a mean absolute deviation and 2) the variance and standard deviation of a
population and of a sample. (page 133)
h. calculate and interpret the proportion of observations falling within a specified number of standard deviations of the
mean using Chebyshev’s inequality. (page 137)
i. calculate and interpret the coefficient of variation and the Sharpe ratio. (page 138)
j. explain skewness and the meaning of a positively or negatively skewed return distribution. (page 140)
k. describe the relative locations of the mean, median, and mode for a unimodal, nonsymmetrical distribution. (page 140)
l. explain measures of sample skewness and kurtosis. (page 141)
m. compare the use of arithmetic and geometric means when analyzing investment returns. (page 143)
The topical coverage corresponds with the following CFA Institute assigned reading:
9 . Pr obability Concepts
The candidate should be able to:
a. define a random variable, an outcome, an event, mutually exclusive events, and exhaustive events. (page 159)
b. state the two defining properties of probability and distinguish among empirical, subjective, and a priori probabilities.
(page 159)
c. state the probability of an event in terms of odds for and against the event. (page 160)
d. distinguish between unconditional and conditional probabilities. (page 161)
e. explain the multiplication, addition, and total probability rules. (page 161)
f. calculate and interpret 1) the joint probability of two events, 2) the probability that at least one of two events will occur,
given the probability of each and the joint probability of the two events, and 3) a joint probability of any number of
independent events. (page 161)
g. distinguish between dependent and independent events. (page 165)
h. calculate and interpret an unconditional probability using the total probability rule. (page 166)
i. explain the use of conditional expectation in investment applications. (page 170)
j. explain the use of a tree diagram to represent an investment problem. (page 170)
k. calculate and interpret covariance and correlation. (page 171)
l. calculate and interpret the expected value, variance, and standard deviation of a random variable and of returns on a
portfolio. (page 174)
m. calculate and interpret covariance given a joint probability function. (page 176)
n. calculate and interpret an updated probability using Bayes’ formula. (page 180)
o. identify the most appropriate method to solve a particular counting problem and solve counting problems using
factorial, combination, and permutation concepts. (page 182)

STUDY SESSION 3
The topical coverage corresponds with the following CFA Institute assigned reading:
1 0 . Common Pr obability Distr ibutions
The candidate should be able to:
a. define a probability distribution and distinguish between discrete and continuous random variables and their
probability functions. (page 203)
b. describe the set of possible outcomes of a specified discrete random variable. (page 203)
c. interpret a cumulative distribution function. (page 205)
d. calculate and interpret probabilities for a random variable, given its cumulative distribution function. (page 205)
e. define a discrete uniform random variable, a Bernoulli random variable, and a binomial random variable. (page 206)
f. calculate and interpret probabilities given the discrete uniform and the binomial distribution functions. (page 206)
g. construct a binomial tree to describe stock price movement. (page 209)


h. calculate and interpret tracking error. (page 211)
i. define the continuous uniform distribution and calculate and interpret probabilities, given a continuous uniform
distribution. (page 211)
j. explain the key properties of the normal distribution. (page 212)
k. distinguish between a univariate and a multivariate distribution and explain the role of correlation in the multivariate
normal distribution. (page 213)
l. determine the probability that a normally distributed random variable lies inside a given interval. (page 214)
m. define the standard normal distribution, explain how to standardize a random variable, and calculate and interpret
probabilities using the standard normal distribution. (page 216)
n. define shortfall risk, calculate the safety-first ratio, and select an optimal portfolio using Roy’s safety-first criterion.
(page 219)
o. explain the relationship between normal and lognormal distributions and why the lognormal distribution is used to
model asset prices. (page 221)
p. distinguish between discretely and continuously compounded rates of return and calculate and interpret a continuously
compounded rate of return, given a specific holding period return. (page 222)
q. explain Monte Carlo simulation and describe its applications and limitations. (page 224)
r. compare Monte Carlo simulation and historical simulation. (page 225)
The topical coverage corresponds with the following CFA Institute assigned reading:
1 1 . Sampling and Estimation
The candidate should be able to:
a. define simple random sampling and a sampling distribution. (page 240)
b. explain sampling error. (page 240)
c. distinguish between simple random and stratified random sampling. (page 241)
d. distinguish between time-series and cross-sectional data. (page 242)
e. explain the central limit theorem and its importance. (page 242)
f. calculate and interpret the standard error of the sample mean. (page 243)
g. identify and describe desirable properties of an estimator. (page 245)
h. distinguish between a point estimate and a confidence interval estimate of a population parameter. (page 245)
i. describe properties of Student’s t-distribution and calculate and interpret its degrees of freedom. (page 245)
j. calculate and interpret a confidence interval for a population mean, given a normal distribution with 1) a known
population variance, 2) an unknown population variance, or 3) an unknown variance and a large sample size. (page
247)
k. describe the issues regarding selection of the appropriate sample size, data-mining bias, sample selection bias,
survivorship bias, look-ahead bias, and time-period bias. (page 252)
The topical coverage corresponds with the following CFA Institute assigned reading:
1 2 . Hypothesis Testing
The candidate should be able to:
a. define a hypothesis, describe the steps of hypothesis testing, and describe and interpret the choice of the null and
alternative hypotheses. (page 264)
b. distinguish between one-tailed and two-tailed tests of hypotheses. (page 265)
c. explain a test statistic, Type I and Type II errors, a significance level, and how significance levels are used in hypothesis
testing. (page 269)
d. explain a decision rule, the power of a test, and the relation between confidence intervals and hypothesis tests. (page
271)
e. distinguish between a statistical result and an economically meaningful result. (page 273)
f. explain and interpret the p-value as it relates to hypothesis testing. (page 274)
g. identify the appropriate test statistic and interpret the results for a hypothesis test concerning the population mean of
both large and small samples when the population is normally or approximately normally distributed and the variance
is 1) known or 2) unknown. (page 275)
h. identify the appropriate test statistic and interpret the results for a hypothesis test concerning the equality of the
population means of two at least approximately normally distributed populations, based on independent random
samples with 1) equal or 2) unequal assumed variances. (page 278)
i. identify the appropriate test statistic and interpret the results for a hypothesis test concerning the mean difference of
two normally distributed populations. (page 282)
j. identify the appropriate test statistic and interpret the results for a hypothesis test concerning 1) the variance of a
normally distributed population, and 2) the equality of the variances of two normally distributed populations based
on two independent random samples. (page 286)
k. distinguish between parametric and nonparametric tests and describe situations in which the use of nonparametric tests
may be appropriate. (page 293)
The topical coverage corresponds with the following CFA Institute assigned reading:
1 3 . Technical A nalysis
The candidate should be able to:
a. explain principles of technical analysis, its applications, and its underlying assumptions. (page 304)
b. describe the construction of different types of technical analysis charts and interpret them. (page 305)


c. explain uses of trend, support, resistance lines, and change in polarity. (page 308)
d. describe common chart patterns. (page 309)
e. describe common technical analysis indicators (price-based, momentum oscillators, sentiment, and flow of funds). (page
311)
f. explain how technical analysts use cycles. (page 316)
g. describe the key tenets of Elliott Wave Theory and the importance of Fibonacci numbers. (page 316)
h. describe intermarket analysis as it relates to technical analysis and asset allocation. (page 317)


The following is a review of the Ethical and Professional Standards principles designed to address the learning
outcome statements set forth by CFA Institute. Cross-Reference to CFA Institute Assigned Reading #1.

E THICS AND T RUST IN THE INVESTMENT P ROFESSION
Study Session 1

EXAM FOCUS
From this reading, candidates should learn the definitions of ethics and ethical behavior presented by
the authors and the arguments presented for having a code of ethics and following ethical principles.
Additionally, the arguments for integrating ethics into the decision-making process include testable
material.
LOS 1.a: Explain ethics.
Ethics can be described as a set of shared beliefs about what is good or acceptable behavior and
what is bad or unacceptable behavior. Ethics also refers to the study of good and bad behavior.
Ethical conduct has been described as behavior that follows moral principles and is consistent with
society’s ethical expectations.
Ethical conduct has also been described as conduct that improves outcomes for stakeholders, who
are people directly or indirectly affected by the conduct. Examples of stakeholders in the case of
investment professionals include their clients, co-workers, employers, and the investment profession
as a whole. Some decisions may bring positive results for you, but negative consequences for a
stakeholder, such as a co-worker. Ethical conduct is behavior that balances your self-interest with the
impact on others.
LOS 1.b: Describe the role of a code of ethics in defining a profession.
A code of ethics is a written set of moral principles that can guide behavior by describing what is
considered acceptable behavior. Having a code of ethics is a way to communicate the values,
principles, and expectations of an organization or other group of people and provides a general guide
to what constitutes acceptable behavior. Some codes of ethics include a set of rules or standards that
require some minimum level of ethical behavior.
A profession refers to a group of people with specialized skills and knowledge who serve others and
agree to behave in accordance with a code of ethics. A professional code of ethics is a way for a
profession to communicate to the public that its members will use their knowledge and skills to serve
their clients in an honest and ethical manner.
LOS 1.c: Identify challenges to ethical behavior.
One challenge to ethical behavior is that individuals tend to overrate the ethical quality of their
behavior on a relative basis and overemphasize the importance of their own personal traits in
determining the ethical quality of their behavior.
It is claimed that external or situational influences are a more important determinant of the ethical
quality of behavior than internal (personal) traits that influence behavior. One situational influence is
social pressure from others. Loyalty to an employer, supervisor, organization, or co-workers can
cause individuals to act in unethical ways as they place more importance on their self-interest and
short-term results than on longerterm results and the ethical quality of their decisions and behavior.


The prospect of acquiring more money or greater prestige can cause individuals to engage in
unethical behavior.
Firms with strict rules-based compliance procedures run the risk of fostering a culture that is so
focused on adhering to compliance rules that individuals only ask themselves what they can do. The
question of what behavior they should engage in, based on ethical principles and longer-term results,
is often not addressed in such situations.
LOS 1.d: Describe the need for high ethical standards in the investment industry.
Investment professionals have a special responsibility because they are entrusted with their clients’
wealth. The responsibility to use their specialized knowledge and skills to both protect and grow
client assets makes high ethical standards all the more important. Investment advice and
management are intangible products, making quality and value received more difficult to evaluate
than for tangible products such as a laptop computer or a restaurant meal. For this reason, trust in
investment professionals takes on an even greater importance than in many other businesses.
Failure to act in a highly ethical manner can damage not only client wealth but also impede the
success of investment firms and investment professionals because potential investors will be less
likely to use their services.
Unethical behavior by financial services professionals can have negative effects for society as a
whole. The financial services industry serves as an intermediary between savers and those seeking
financing for their business activities. A lack of trust in financial advisors will reduce the funds
entrusted to them and increase the cost of raising capital for business investment and growth. When
investors cannot rely on the information they receive from financial services professionals, this adds
another layer of risk on top of the investment risks that investors face. Even the perception of
additional risk will reduce the amounts invested and increase the returns required to attract investor
capital.
In addition to reducing the amount of investment overall, unethical behavior—such as providing
incomplete, misleading, or false information to investors—can affect the allocation of the capital
that is raised. Misallocation of capital to businesses other than those with the most potential for
growth and societal benefit reduces the growth of an economy and the well-being of its people.
When the allocation of investment capital is constrained or inefficient, the negative consequences
extend to all the participants in an economy.
LOS 1.e: Distinguish between ethical and legal standards.
Not all unethical actions are illegal, and not all illegal actions are unethical. In some places it may be
illegal to report one’s employer’s actions against the best interests of clients by sharing what is
considered private company information with authorities, but doing so may be considered ethical
“whistleblowing” behavior by some. Acts of civil disobedience that are illegal are also considered by
many to be ethical behavior. On the other hand, recommending investment in a relative’s firm
without disclosure may not be illegal, but would be considered unethical by many.
Ethical principles often set a higher standard of behavior than laws and regulations. New laws and
regulations often result from recent instances of what is perceived to be unethical behavior. Just as
the Securities Act of 1933, the Glass-Steagall Act, and the Securities Exchange Act of 1934 followed
the perceived bad behavior by investment professionals and bankers leading to the 1929 market
crash, the Sarbanes-Oxley laws followed the accounting scandals at Enron and Worldcom, and the
Dodd-Frank Act followed the 2008 financial crisis. New laws and regulations can create opportunities
for different unethical behavior. In general, ethical decisions require more judgment and
consideration of the impact of behavior on many stakeholders compared to legal decisions.


LOS 1.f: Describe and apply a framework for ethical decision making.
Ethical decisions will be improved when ethics are integrated into a firm’s decision making process.
This will allow decision makers and teams to consider alternative actions as well as shorter- and
longer-term consequences from various perspectives, improving the ethical aspects of their
decisions. To do this it is first necessary that the firm adopt a code of ethics to guide the process.
Such integration provides an opportunity to teach, practice, and reinforce ethical decision making.
This is an important part of developing an ethical culture. The support of senior management for
integrating ethics into the decision-making process is also very important in developing a culture and
processes that will result in ethical decision making.
Using a framework for ethical decision making helps individuals identify the important issues
involved, examine these issues from multiple perspectives, develop the necessary judgment and
decision making skills required, and avoid unanticipated ethical consequences.
The following ethical decision-making framework is presented in the Level I CFA curriculum:1
Identify: Relevant facts, stakeholders and duties owed, ethical principles, conflicts of
interest.
Consider: Situational influences, additional guidance, alternative actions.
Decide and act.
Reflect: Was the outcome as anticipated? Why or why not?
In the first step, decision makers need to identify the facts they have to work with, and the facts they
would like to have, before making a decision. Stakeholders—those affected by the decision—must be
identified. These stakeholders may include the employer, clients, co-workers, self, family, and others
in the industry, and the duties to each stakeholder should be identified. This part of the process will
also help in explicitly identifying potential conflicts of interest among the various stakeholders. At this
point the decision makers should be able to identify the ethical principles involved in the decision,
although greater clarity about those may also be gained throughout the process.
In the second step, the framework suggests situational factors that may influence decision makers
should be identified and considered along with any personal biases that may come into play. At this
point, decision makers may seek outside guidance which can come from a mentor, colleagues, or
friends who have shown good judgment in the past. Guidance may also be sought from the firm’s
legal and compliance departments. This guidance from alternative sources will help to provide a
variety of perspectives from which the decision under consideration can be viewed, as well as help in
developing alternatives that should be considered. Finally the alternative actions that have been
identified are all considered, taking into account both the short-term and long-term effects of each
alternative action and any potential but unanticipated ethical implications.
In the final step, decision makers should evaluate the outcomes of the actions that were taken. In
particular, they should consider whether the decisions had their intended results and whether
appropriate consideration was given to ethical principles, situational influences, and duties to clients
and other stakeholders.
1

“Ethics and Trust in the Investment Profession,” Bidhan L Parmar, PhD, Dorothy C. Kelly, CFA, and David B. Stevens, CFA, in CFA
Program 2017 Level I Curriculum, Volume 1 (CFA Institute, 2016).


KEY CONCEPTS
LOS 1.a
Ethical behavior is that which conforms to a set of rules and moral principles based on shared beliefs
about what behavior is acceptable and what behavior is unacceptable.
LOS 1.b
A professional code of ethics is a way for a profession to communicate to the public that its members
will use their knowledge and skills to serve their clients in an honest and ethical manner, and can
increase public confidence and trust that members will act ethically.
LOS 1.c
Challenges to ethical behavior include overestimating one’s own ethical character, considering only
near-term consequences and not longer-term consequences of behavior, and letting situational
(external) influences, such as peer pressure, unduly affect one’s decisions and behavior.
LOS 1.d
Investment professionals have a special responsibility to use their specialized knowledge and skills to
both protect and grow client assets. The fact that investment management is an intangible product
makes high ethical standards all the more important in the financial services profession.
LOS 1.e
Not all unethical actions are illegal, and not all illegal actions are unethical. Laws are more specific
than ethical principles and often address prior unethical behavior. Ethical behavior requires more
judgment; acts such as civil disobedience may be considered ethical even when they are illegal.
LOS 1.f
A framework for ethical decision making is designed to lead to better decisions by identifying the
stakeholders affected and the conflicts of interest among them, considering alternative actions and
the relevant situational influences on decision makers, seeking out different perspectives, and
evaluating decisions to see if they had unintended consequences.


CONCEPT CHECKERS
1. Ethics is least likely:
A. the study of acceptable and unacceptable behavior.
B. the careful following of all laws and regulations.
C. a set of moral principles to guide behavior.
2. A code of ethics:
A. is a personal view of acceptable behavior.
B. encompasses current “best practices.”
C. specifies a minimum level of acceptable conduct.
3. A professional code of conduct:
A. can increase public trust in the profession.
B. guarantees that members will adhere to a minimum level of ethical conduct.
C. includes standards that provide guidance for specific behaviors.
4. Situational factors that influence ethical behavior are least likely to include:
A. social pressure.
B. large financial rewards.
C. a lack of ethical principles.
5. Compared to complying with laws and regulations, complying with a code of ethics:
A. is considered a lower standard.
B. often involves more judgment.
C. includes compliance with all laws and regulations.
6. Employing a framework for decision making that includes the ethical aspects of the decision
is most likely to:
A. lead to higher profits.
B. avoid any unintended ethical consequences of decisions.
C. balance the interests of various stakeholders.


ANSWERS – CONCEPT CHECKERS
1. Ethics is least likely:
A. the study of acceptable and unacceptable behavior.
B. the careful following of all laws and regulations.
C. a set of moral principles to guide behavior.
Simply following all laws and regulations is not as high a standard as ethical behavior.
Ethical principles typically involve more judgment than laws or regulations.
2. A code of ethics:
A. is a personal view of acceptable behavior.
B. encompasses current “best practices.”
C. specifies a minimum level of acceptable conduct.
A code of ethics specifies a minimum level of acceptable conduct for a group or
organization, whereas “best practices” are suggested behavior, not a minimum acceptable
level.
3. A professional code of conduct:
A. can increase public trust in the profession.
B. guarantees that members will adhere to a minimum level of ethical conduct.
C. includes standards that provide guidance for specific behaviors.
A professional code of conduct communicates to the public that members have promised to
uphold a minimum level of ethical conduct when acting for clients. This is no guarantee that
all members will follow the code at all times. A code of conduct may include specific
standards of behavior or only state principles of conduct without specific standards or
guidance.
4. Situational factors that influence ethical behavior are least likely to include:
A. social pressure.
B. large financial rewards.
C. a lack of ethical principles.
Situational factors are those external to the decision makers, such as financial rewards and
desire to please co-workers or others. Researchers have found that external factors are
often more likely than a lack of personal ethics to lead to poor ethical decisions.
5. Compared to complying with laws and regulations, complying with a code of ethics:
A. is considered a lower standard.
B. often involves more judgment.
C. includes compliance with all laws and regulations.
A code of ethics is considered a higher standard of behavior as it goes beyond simply
legality of behavior. Compliance with the ethical principles of a code of ethics often
requires judgment in balancing the interests of various stakeholders and consideration of
short-term effects with longer-term effects of decisions. Some behavior that is illegal, such
as civil disobedience or “whistle-blowing,” is considered to be ethical behavior by many.
6. Employing a framework for decision making that includes the ethical aspects of the decision
is most likely to:


A. lead to higher profits.
B. avoid any unintended ethical consequences of decisions.
C. balance the interests of various stakeholders.
A decision-making framework that includes the ethical aspects of the decision is should
consider the conflicts among the interests of various stakeholders so that decision makers
can use the company’s stated ethical principles and their judgment to balance these
interests in an ethical manner. Profit maximization, at least in the short term, does not
necessarily follow from sound ethical judgment. While integrating ethics into the decisionmaking process can consider and reduce unintended ethical consequences of a decision,
avoiding them altogether can never be assured.


The following is a review of the Ethical and Professional Standards principles designed to address the learning outcome
statements set forth by CFA Institute. Cross-Reference to CFA Institute Assigned Reading #2.

CODE OF E THICS AND S TANDARDS OF P ROFESSIONAL
CONDUCT
Study Session 1

EXAM FOCUS
In addition to reading this review of the ethics material, we strongly recommend that all candidates
for the CFA® examination read the Standards of Practice Handbook 11th Edition (2014) multiple
times. As a Level I CFA candidate, it is your responsibility to comply with the Code and Standards. The
complete Code and Standards are reprinted in Volume 1 of the CFA Program Curriculum.
LOS 2.a: Describe the structure of the CFA Institute Professional Conduct Program and the
process for the enforcement of the Code and Standards.
The CFA Institute Professional Conduct Program is covered by the CFA Institute Bylaws and the Rules
of Procedure for Proceedings Related to Professional Conduct. The Program is based on the
principles of fairness of the process to members and candidates and maintaining the confidentiality
of the proceedings. The Disciplinary Review Committee of the CFA Institute Board of Governors has
overall responsibility for the Professional Conduct Program and enforcement of the Code and
Standards.
The CFA Institute Professional Conduct staff conducts inquiries related to professional conduct.
Several circumstances can prompt such an inquiry:
1. Self-disclosure by members or candidates on their annual Professional Conduct Statements
of involvement in civil litigation or a criminal investigation, or that the member or
candidate is the subject of a written complaint.
2. Written complaints about a member or candidate’s professional conduct that are received
by the Professional Conduct staff.
3. Evidence of misconduct by a member or candidate that the Professional Conduct staff
received through public sources, such as a media article or broadcast.
4. A report by a CFA exam proctor of a possible violation during the examination.
5. Analysis of exam materials and monitoring of social media by CFA Institute.
Once an inquiry has begun, the Professional Conduct staff may request (in writing) an explanation
from the subject member or candidate and may: (1) interview the subject member or candidate, (2)
interview the complainant or other third parties, and/or (3) collect documents and records relevant
to the investigation.
The Professional Conduct staff may decide: (1) that no disciplinary sanctions are appropriate, (2) to
issue a cautionary letter, or (3) to discipline the member or candidate. In a case where the
Professional Conduct staff finds a violation has occurred and proposes a disciplinary sanction, the
member or candidate may accept or reject the sanction. If the member or candidate chooses to
reject the sanction, the matter will be referred to a disciplinary review panel of CFA Institute
members for a hearing. Sanctions imposed may include condemnation by the member’s peers or
suspension of candidate’s continued participation in the CFA Program.


LOS 2.b: State the six components of the Code of Ethics and the seven Standards of
Professional Conduct.

CODE OF ETHICS
Members of CFA Institute [including Chartered Financial Analyst® (CFA®) charterholders] and
candidates for the CFA designation (“Members and Candidates”) must:1
Act with integrity, competence, diligence, respect, and in an ethical manner with the public,
clients, prospective clients, employers, employees, colleagues in the investment profession,
and other participants in the global capital markets.
Place the integrity of the investment profession and the interests of clients above their own
personal interests.
Use reasonable care and exercise independent professional judgment when conducting
investment analysis, making investment recommendations, taking investment actions, and
engaging in other professional activities.
Practice and encourage others to practice in a professional and ethical manner that will
reflect credit on themselves and the profession.
Promote the integrity and viability of the global capital markets for the ultimate benefit of
society.
Maintain and improve their professional competence and strive to maintain and improve
the competence of other investment professionals.

THE STANDARDS OF PROFESSIONAL CONDUCT
I: Professionalism
II: Integrity of Capital Markets
III: Duties to Clients
IV: Duties to Employers
V: Investment Analysis, Recommendations, and Actions
VI: Conflicts of Interest
VII: Responsibilities as a CFA Institute Member or CFA Candidate
LOS 2.c: Explain the ethical responsibilities required by the Code and Standards, including the
sub-sections of each Standard.

STANDARDS OF PROFESSIONAL CONDUCT2
I. PROFESSIONALISM
A. Knowledge of the Law. Members and Candidates must understand and comply with all
applicable laws, rules, and regulations (including the CFA Institute Code of Ethics and
Standards of Professional Conduct) of any government, regulatory organization, licensing
agency, or professional association governing their professional activities. In the event of
conflict, Members and Candidates must comply with the more strict law, rule, or regulation.
Members and Candidates must not knowingly participate or assist in any violation of laws,
rules, or regulations and must disassociate themselves from any such violation.
B. Independence and Objectivity. Members and Candidates must use reasonable care and
judgment to achieve and maintain independence and objectivity in their professional


Tài liệu bạn tìm kiếm đã sẵn sàng tải về

Tải bản đầy đủ ngay

×