Cognitive errors – Result from incomplete information or inability to analyze.Apply heuristics until they no longer work, then adjust them.
Self-control bias – Favor current consumption rather than saving income for future goals.Framing – The way income is framed affects whether it is saved or consumed.No one can consistently earn excess returns. Strong-form efficient – All information reflected in prices.Semi-strong form efficient – Prices reflect all public information.Weak-form efficient – Prices incorporate all past price and volume data.
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No free lunch – No manager should be able to generate excess returns (alphas) consistently.The price is right – Asset prices reflect and instantly adjust to all available information.Satisfice – Making a reasonable but not necessarily optimal decision.Bounded rationality – Individuals act as rationally as possible, but are constrained by lack of knowledge and cognitive ability.SS1&2: ETHICS Review the SchweserNotesTM and work the questions. LEVEL III SCHWESER’S QuickSheet Critical Concepts for the 2017 CFA® Exam