Page 24 - FINAL CFA SLIDES DECEMBER 2018 DAY 12
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Session Unit 12:
42. Portfolio Risk and Return: Part II
Passive investment strategy -on the presumption that market prices are informationally
efficient, this strategy entails investing in an index of risky assets that serves as a proxy for the
market portfolio and allocating a portion of the investable assets to a risk-free asset, such as
short-term government securities).
Active portfolio management strategy –on the presumption that market prices are not informationally
efficient, there will be differences between investors’ best estimates of security values –which they deem
correct, versus market values –which they deem incorrect, and hence, they will rather increase weights
in securities that they believe are undervalued and vive versa!
tanties
LOS 42.c: Explain systematic and nonsystematic risk, including why an investor should not expect to
receive additional return for bearing nonsystematic risk., p153
Non-diversifiable risk Unique, diversifiable, or
or market risk firm-specific risk
