Page 43 - FINAL CFA SLIDES DECEMBER 2018 DAY 3
P. 43

Session Unit 2:

                                                                                         9. Probability Concepts





       LOS 9.i: Explain the use of conditional expectation in investment applications, p.181






       Evs/Returns can be calculated using conditional probabilities. An analyst would use a

       conditional expected value to revise his expectations when new information arrives.





       Consider the effect of a tariff on steel imports on the returns of a domestic steel stock.



       The stock’s expected return, given that the government imposes the tariff, will be

       higher than the expected return if the tariff is not imposed.
   38   39   40   41   42   43   44   45   46   47   48