Page 34 - FINAL CFA SLIDES DECEMBER 2018 DAY 12
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Session Unit 12:
42. Portfolio Risk and Return: Part II
Example: Identifying mispriced securities, p.164: Based on the table below and Rf = 7% and Rm = 15%. Compute the
ER and Required Return on each stock, determine whether each stock is undervalued, overvalued, or properly valued,
and outline an appropriate trading strategy.
B is undervalued! Buy/go long!
C is correctly valued
Go short, long or ignore!
tanties A is overvalued! Sell/Go short !
P1-Po+D/Po
