Contents

1. Welcome to the 2019 SchweserNotes™

2. Learning Outcome Statements (LOS)

3. Study Session 1—Ethical and Professional Standards

1. Reading 1: Ethics and Trust in the Investment Profession

1. Exam Focus

2. Module 1.1: Ethics and Trust

3. Key Concepts

4. Answer Key for Module Quiz

2. Reading 2: Code of Ethics and Standards of Professional Conduct

1. Exam Focus

2. Module 2.1: Code and Standards

3. Answer Key for Module Quiz

3. Reading 3: Guidance for Standards I–VII

1. Exam Focus

2. Module 3.1: Guidance for Standards I(A) and I(B)

3. Module 3.2: Guidance for Standards I(C) and I(D)

4. Module 3.3: Guidance for Standard II

5. Module 3.4: Guidance for Standards III(A) and III(B)

6. Module 3.5: Guidance for Standards III(C), III(D), and III(E)

7. Module 3.6: Guidance for Standard IV

8. Module 3.7: Guidance for Standard V

9. Module 3.8: Guidance for Standard VI

10. Module 3.9: Guidance for Standard VII

11. Answer Key for Module Quizzes

4. Reading 4: Introduction to the Global Investment Performance Standards

(GIPS®)

1. Exam Focus

2. Module 4.1: Introduction to GIPS

3. Key Concepts

4. Answer Key for Module Quiz

5. Reading 5: The GIPS Standards

1. Module 5.1: The GIPS Standards

2. Key Concepts

3. Answer Key for Module Quiz

4. Topic Assessment: Ethical and Professional Standards

5. Topic Assessment Answers: Ethical and Professional Standards

6. Study Session 2—Quantitative Methods (1)

1. Reading 6: The Time Value of Money

1. Exam Focus

2. Module 6.1: EAY and Compounding Frequency

3. Module 6.2: Calculating PV and FV

4. Module 6.3: Uneven Cash Flows

5. Key Concepts

6. Answer Key for Module Quizzes

2. Reading 7: Discounted Cash Flow Applications

1. Exam Focus

2. Module 7.1: NPV, IRR, and HPR

3. Module 7.2: Returns and Yields

4. Key Concepts

5. Answer Key for Module Quizzes

3. Reading 8: Statistical Concepts and Market Returns

1. Exam Focus

2. Module 8.1 Describing Data Sets

3. Module 8.2: Means and Variance

4. Module 8.3: Skew, Kurtosis, and Sharpe Ratio

5. Key Concepts

6. Answer Key for Module Quizzes

4. Reading 9: Probability Concepts

1. Exam Focus

2. Module 9.1: Conditional and Joint Probabilities

3. Module 9.2: Conditional Expectations, Correlation

4. Module 9.3: Portfolio Variance, Bayes, and Counting Problems

5. Key Concepts

6. Answer Key for Module Quizzes

7. Study Session 3—Quantitative Methods (2)

1. Reading 10: Common Probability Distributions

1. Exam Focus

2. Module 10.1: Uniform and Binomial Distributions

3. Module 10.2: Normal Distributions

4. Module 10.3: Lognormal Distribution, Simulations

5. Key Concepts

6. Answer Key for Module Quizzes

2. Reading 11: Sampling and Estimation

1. Exam Focus

2. Module 11.1: Central Limit Theorem and Standard Error

3. Module 11.2: Confidence Intervals and t-Distribution

4. Key Concepts

5. Answer Key for Module Quizzes

3. Reading 12: Hypothesis Testing

1. Exam Focus

2. Module 12.1: Hypothesis Tests and Types of Errors

3. Module 12.2: Tests of Means and p-Values

4. Module 12.3: Mean Differences, Difference in Means

5. Key Concepts

6. Answer Key for Module Quizzes

4. Reading 13: Technical Analysis

1. Exam Focus

2. Module 13.1: Technical Analysis

专业提供CFA/FRM/AQF视频课程资料 微信：fcayyh

8.

9.

10.

11.

3. Key Concepts

4. Answer Key for Module Quiz

Topic Assessment: Quantitative Methods

Topic Assessment Answers: Quantitative Methods

Formulas

Appendices

1. Appendix A: Areas Under The Normal Curve

2. Cumulative Z-Table

3. Appendix B: Student’s t-Distribution

4. Appendix C: F-Table at 5% (Upper Tail)

5. Appendix D: F-Table at 2.5% (Upper Tail)

6. Appendix E: Chi-Squared table

List of pages

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

14.

15.

16.

17.

18.

19.

20.

21.

22.

23.

24.

25.

26.

27.

28.

29.

30.

31.

32.

33.

34.

35.

36.

37.

38.

39.

40.

41.

42.

i

iv

ix

x

xi

xii

xiii

xiv

xv

1

2

3

4

5

6

7

9

10

11

12

13

14

15

16

17

18

19

20

21

23

24

25

26

27

28

29

30

31

32

33

34

35

43.

44.

45.

46.

47.

48.

49.

50.

51.

52.

53.

54.

55.

56.

57.

58.

59.

60.

61.

62.

63.

64.

65.

66.

67.

68.

69.

70.

71.

72.

73.

74.

75.

76.

77.

78.

79.

80.

81.

82.

83.

84.

85.

86.

87.

88.

36

37

38

39

40

41

42

43

44

45

46

47

48

49

50

51

53

54

55

56

57

58

59

60

61

63

64

65

66

67

68

69

70

71

72

73

74

75

76

77

78

79

80

81

82

83

89.

90.

91.

92.

93.

94.

95.

96.

97.

98.

99.

100.

101.

102.

103.

104.

105.

106.

107.

108.

109.

110.

111.

112.

113.

114.

115.

116.

117.

118.

119.

120.

121.

122.

123.

124.

125.

126.

127.

128.

129.

130.

131.

132.

133.

134.

84

85

86

87

88

89

90

91

92

93

94

95

97

98

99

100

101

102

103

104

105

106

107

108

109

110

111

112

113

114

115

116

117

119

120

121

122

123

124

125

126

127

128

129

130

131

135.

136.

137.

138.

139.

140.

141.

142.

143.

144.

145.

146.

147.

148.

149.

150.

151.

152.

153.

154.

155.

156.

157.

158.

159.

160.

161.

162.

163.

164.

165.

166.

167.

168.

169.

170.

171.

172.

173.

174.

175.

176.

177.

178.

179.

180.

132

133

134

135

136

137

138

139

140

141

142

143

144

145

146

147

148

149

150

151

152

153

155

156

157

158

159

160

161

162

163

164

165

167

168

169

170

171

172

173

175

176

177

178

179

181

181.

182.

183.

184.

185.

186.

187.

188.

189.

190.

191.

192.

193.

194.

195.

196.

197.

198.

199.

200.

201.

202.

203.

204.

205.

206.

207.

208.

209.

210.

211.

212.

213.

214.

215.

216.

217.

218.

219.

220.

221.

222.

223.

224.

225.

226.

182

183

184

185

186

187

188

189

190

191

192

193

194

195

196

197

198

199

200

201

202

203

205

206

207

208

209

210

211

212

213

214

215

216

217

218

219

220

221

222

223

224

225

226

227

228

227.

228.

229.

230.

231.

232.

233.

234.

235.

236.

237.

238.

239.

240.

241.

242.

243.

244.

245.

246.

247.

248.

249.

250.

251.

252.

253.

254.

255.

256.

257.

258.

259.

260.

261.

262.

263.

264.

265.

266.

267.

268.

269.

270.

271.

272.

229

230

231

232

233

234

235

236

237

238

239

240

241

242

243

244

245

246

247

248

249

250

251

252

253

254

255

256

257

258

259

260

261

262

263

264

265

266

267

269

270

271

272

273

274

275

273.

274.

275.

276.

277.

278.

279.

280.

281.

282.

283.

284.

285.

286.

287.

288.

289.

290.

291.

292.

293.

294.

295.

296.

297.

298.

299.

276

277

278

279

280

281

282

283

284

285

287

288

289

290

291

293

294

295

296

297

298

299

300

301

302

303

304

Kaplan Schweser’s Path to Success

Level I CFA® Exam

Welcome

As the head of Advanced Designations at Kaplan Schweser, I am pleased to have the opportunity to

help you prepare for the CFA® exam. Kaplan Schweser has decades of experience in delivering the

most effective CFA exam prep products in the market and I know you will find them to be invaluable in

your studies.

专业提供CFA/FRM/AQF视频课程资料 微信：fcayyh

Our products are designed to be an integrated study solution across print and digital media to provide

you the best learning experience, whether you are studying with a physical book, online, or on your

mobile device.

Our core product, the SchweserNotes™, addresses all of the Topics, Study Sessions, Readings, and

LOS in the CFA curriculum. Each reading in the SchweserNotes has been broken into smaller, bite-sized

modules with Module Quizzes interspersed throughout to help you continually assess your

comprehension. Topic Assessments appear at the end of each Topic to help you assess your knowledge

of the material before you move on to the next section.

All purchasers of the SchweserNotes receive online access to the Kaplan Schweser online platform (our

learning management system or LMS) at www.Schweser.com. In the LMS, you will see a dashboard that

tracks your overall progress and performance and also includes an Activity Feed, which provides

structure and organization to the tasks required to prepare for the CFA exam. You also have access to

the SchweserNotes, Module Quizzes, and Topic Assessments content as well as the Video Lectures (if

purchased), which contain a short video that complements each module in the SchweserNotes. Look for

the icons indicating where video content, Module Quizzes, and Topic Assessments are available online. I

strongly encourage you to enter your Module Quiz and Topic Assessment answers online and use the

dashboard to track your progress and stay motivated.

Again, thank you for trusting Kaplan Schweser with your CFA exam preparation. We’re here to help you

throughout your journey to become a CFA charterholder.

Regards,

Derek Burkett

Derek Burkett, CFA, FRM, CAIA

Vice President (Advanced Designations)

Contact us for questions about your study package, upgrading your package, purchasing

additional study materials, or for additional information:

888.325.5072 (U.S.) | +1 608.779.8327 (Int’l.)

staff@schweser.com | www.schweser.com/cfa

WELCOME TO THE 2019

SCHWESERNOTES™

Thank you for trusting Kaplan Schweser to help you pass the Level I CFA exam. You

have made an exceptionally good decision, and we congratulate you for taking on the

challenge of earning your CFA charter.

Your first step should be to view the “How to Pass the Level I CFA Exam” video

(available in your Resource Library), in which I explain the structure of the Level I

exam, the format of exam questions, and topic area exam weights. We also provide

advice on interpreting the (500+) Level I CFA Learning Outcome Statements (LOS),

how to create an effective study plan, and study techniques based on research in

learning science. Understanding the exact nature of the challenge you have taken on is

an important first step in preparing to pass the Level I CFA exam.

The next step is to study and learn the material required for the exam. The best time to

begin that study is today (regardless of when you are reading this). Less than 40% of

those who register for a Level I exam pass the exam (including re-takers). For many,

passing the exam is a formidable challenge. One of reasons candidates give most

frequently for failing is “not starting early enough.”

Begin your study today with Study Session 2, Quantitative Methods, and progress

through Study Session 19, Alternative Investments, over the coming months. Complete

your initial study of the Level I CFA curriculum with Study Session 1, Ethical and

Professional Standards. While the SchweserNotes provide an excellent summary of the

required material for Study Session 1, we strongly recommend that, for this material, all

candidates also study the CFA Institute Code of Ethics and Standards of Professional

Conduct (Readings 2 and 3 in the Level I CFA Curriculum, Volume 1) at this point and

again shortly before the exam.

It is very important to finish your initial study of the entire curriculum at least one

month (earlier if possible) prior to your exam date to allow sufficient time for practice

and targeted review. During this period, you should take all the Schweser Practice

Exams. Two weeks prior to the exam you should take the Schweser Mock Exam, which

is offered by CFA Societies in well over 100 locations worldwide, as well as online for

those who can’t make it to a live Schweser Mock. This final review period is when you

will get a clear indication of how effective your study has been and which topic areas

require significant additional review on your part. Practice answering exam-like

questions across all topic areas and working on your exam timing will be important

determinants of your success on exam day.

Finally, I would like to thank my assistant, Craig Prochaska, CFA, who has been

invaluable in the preparation of all our Level I study materials and candidate support for

13 years. Craig and I will be answering your questions and supporting your study

throughout the exam season.

Best regards,

Doug Van Eaton

Doug Van Eaton, PhD, CFA

SVP for CFA Education

Kaplan Schweser

LEARNING OUTCOME STATEMENTS (LOS)

STUDY SESSION 1

This topical coverage corresponds with the following CFA Institute assigned reading:

1. Ethics and Trust in the Investment Profession

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 2)

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 4)

This topical coverage corresponds with the following CFA Institute assigned reading:

2. Code of Ethics and Standards of Professional 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 9)

b. state the six components of the Code of Ethics and the seven Standards of

Professional Conduct. (page 10)

c. explain the ethical responsibilities required by the Code and Standards, including

the sub-sections of each Standard. (page 11)

This topical coverage corresponds with the following CFA Institute assigned reading:

3. Guidance for Standards 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 17)

b. distinguish between conduct that conforms to the Code and Standards and conduct

that violates the Code and Standards. (page 17)

c. recommend practices and procedures designed to prevent violations of the Code of

Ethics and Standards of Professional Conduct. (page 17)

This topical coverage corresponds with the following CFA Institute assigned reading:

4. Introduction to the Global Investment Performance Standards

(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 47)

b. explain the construction and purpose of composites in performance

reporting.(page 48)专业提供CFA/FRM/AQF视频课程资料 微信：fcayyh

c. explain the requirements for verification. (page 48)

This topical coverage corresponds with the following CFA Institute assigned reading:

5. The GIPS Standards

The candidate should be able to:

a. describe the key features of the GIPS standards and the fundamentals of

compliance. (page 53)

b. describe the scope of the GIPS standards with respect to an investment firm’s

definition and historical performance record. (page 55)

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 56)

d. describe the nine major sections of the GIPS standards. (page 56)

STUDY SESSION 2

This 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 73)

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 74)

c. calculate and interpret the effective annual rate, given the stated annual interest rate

and the frequency of compounding. (page 74)

d. solve time value of money problems for different frequencies of compounding.

(page 76)

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 77)

f. demonstrate the use of a time line in modeling and solving time value of money

problems. (page 89)

This topical coverage corresponds with the following CFA Institute assigned reading:

7. Discounted Cash Flow Applications

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 99)

b. contrast the NPV rule to the IRR rule, and identify problems associated with the

IRR rule. (page 102)

c. calculate and interpret a holding period return (total return). (page 103)

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 105)

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 108)

f. convert among holding period yields, money market yields, effective annual yields,

and bond equivalent yields. (page 110)

This topical coverage corresponds with the following CFA Institute assigned reading:

8. Statistical Concepts and Market Returns

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 119)

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 124)

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 131)

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 132)

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 142)

m. compare the use of arithmetic and geometric means when analyzing investment

returns. (page 143)

This topical coverage corresponds with the following CFA Institute assigned reading:

9. Probability Concepts

The candidate should be able to:

a. define a random variable, an outcome, an event, mutually exclusive events, and

exhaustive events. (page 153)

b. state the two defining properties of probability and distinguish among empirical,

subjective, and a priori probabilities. (page 154)

c. state the probability of an event in terms of odds for and against the event. (page

154)

d. distinguish between unconditional and conditional probabilities. (page 155)

e. explain the multiplication, addition, and total probability rules. (page 155)

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 156)

g. distinguish between dependent and independent events. (page 159)

h. calculate and interpret an unconditional probability using the total probability rule.

(page 160)

i. explain the use of conditional expectation in investment applications. (page 162)

j. explain the use of a tree diagram to represent an investment problem. (page 162)

k. calculate and interpret covariance and correlation. (page 163)

l. calculate and interpret the expected value, variance, and standard deviation of a

random variable and of returns on a portfolio. (page 166)

m. calculate and interpret covariance given a joint probability function. (page 168)

n. calculate and interpret an updated probability using Bayes’ formula. (page 168)

o. identify the most appropriate method to solve a particular counting problem and

solve counting problems using factorial, combination, and permutation concepts.

(page 170)

STUDY SESSION 3

This topical coverage corresponds with the following CFA Institute assigned reading:

10. Common Probability Distributions

The candidate should be able to:

a. define a probability distribution and distinguish between discrete and continuous

random variables and their probability functions. (page 181)

b. describe the set of possible outcomes of a specified discrete random variable. (page

181)

c. interpret a cumulative distribution function. (page 183)

d. calculate and interpret probabilities for a random variable, given its cumulative

distribution function. (page 183)

e. define a discrete uniform random variable, a Bernoulli random variable, and a

binomial random variable. (page 185)

f. calculate and interpret probabilities given the discrete uniform and the binomial

distribution functions. (page 185)

g. construct a binomial tree to describe stock price movement. (page 187)

h. define the continuous uniform distribution and calculate and interpret probabilities,

given a continuous uniform distribution. (page 189)

i. explain the key properties of the normal distribution. (page 192)

j. distinguish between a univariate and a multivariate distribution and explain the role

of correlation in the multivariate normal distribution. (page 193)

k. determine the probability that a normally distributed random variable lies inside a

given interval. (page 194)

l. define the standard normal distribution, explain how to standardize a random

variable, and calculate and interpret probabilities using the standard normal

distribution. (page 195)

m. define shortfall risk, calculate the safety-first ratio, and select an optimal portfolio

using Roy’s safety-first criterion. (page 199)

n. explain the relationship between normal and lognormal distributions and why the

lognormal distribution is used to model asset prices. (page 202)

o. 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 203)

p. explain Monte Carlo simulation and describe its applications and limitations. (page

204)

q. compare Monte Carlo simulation and historical simulation. (page 205)

This topical coverage corresponds with the following CFA Institute assigned reading:

11. Sampling and Estimation

The candidate should be able to:

a. define simple random sampling and a sampling distribution. (page 214)

b. explain sampling error. (page 214)

c. distinguish between simple random and stratified random sampling. (page 215)

d. distinguish between time-series and cross-sectional data. (page 215)

e. explain the central limit theorem and its importance. (page 216)

f. calculate and interpret the standard error of the sample mean. (page 216)

g. identify and describe desirable properties of an estimator. (page 218)

h. distinguish between a point estimate and a confidence interval estimate of a

population parameter. (page 220)

i. describe properties of Student’s t-distribution and calculate and interpret its degrees

of freedom. (page 220)

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 population variance and a large sample size. (page

223)

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 227)

This topical coverage corresponds with the following CFA Institute assigned reading:

12. 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 236)

b. distinguish between one-tailed and two-tailed tests of hypotheses. (page 237)

c. explain a test statistic, Type I and Type II errors, a significance level, and how

significance levels are used in hypothesis testing. (page 239)

d. explain a decision rule, the power of a test, and the relation between confidence

intervals and hypothesis tests. (page 241)

e. distinguish between a statistical result and an economically meaningful result.

(page 244)

f. explain and interpret the p-value as it relates to hypothesis testing. (page 245)

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 245)

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 250)

i. identify the appropriate test statistic and interpret the results for a hypothesis test

concerning the mean difference of two normally distributed populations. (page

253)

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 256)

k. distinguish between parametric and nonparametric tests and describe situations in

which the use of nonparametric tests may be appropriate. (page 261)

This topical coverage corresponds with the following CFA Institute assigned reading:

13. Technical Analysis

The candidate should be able to:

a. explain principles of technical analysis, its applications, and its underlying

assumptions. (page 269)

b. describe the construction of different types of technical analysis charts and

interpret them. (page 270)

c. explain uses of trend, support, resistance lines, and change in polarity. (page 273)

d. describe common chart patterns. (page 274)

e. describe common technical analysis indicators (price-based, momentum

oscillators, sentiment, and flow of funds). (page 276)

f. explain how technical analysts use cycles. (page 280)

g. describe the key tenets of Elliott Wave Theory and the importance of Fibonacci

numbers. (page 280)

h. describe intermarket analysis as it relates to technical analysis and asset allocation.

(page 281)

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.

READING 1: ETHICS AND TRUST IN THE

INVESTMENT PROFESSION

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.

MODULE 1.1: ETHICS AND TRUST

LOS 1.a: Explain ethics.

Video covering

this content is

available online.

CFA® Program Curriculum, Volume 1, page 6

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, coworkers,

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

coworker. 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.

CFA® Program Curriculum, Volume 1, page 9

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.

CFA® Program Curriculum, Volume 1, page 11

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 coworkers 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.

CFA® Program Curriculum, Volume 1, page 15

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.

## CFA 2019 level 1 schwesernotes book QBank SS 01 quiz 1 answers

## CFA 2019 level 1 schwesernotes book quiz bank SS 01 quiz 1

## CFA 2019 level 1 schwesernotes book quiz bank SS 02 quiz 1 answers

## CFA 2019 level 1 schwesernotes book quiz bank SS 02 quiz 1

## CFA 2019 level 1 schwesernotes book quiz bank SS 03 quiz 1 answers

## CFA 2019 level 1 schwesernotes book quiz bank SS 03 quiz 1

## CFA 2019 level 1 schwesernotes book quiz bank SS 04 quiz 1 answers

## CFA 2019 level 1 schwesernotes book quiz bank SS 04 quiz 1

## CFA 2019 level 1 schwesernotes book quiz bank SS 05 answers

## CFA 2019 level 1 schwesernotes book quiz bank SS 05

Tài liệu liên quan