Quantitative Investment Analysis Workbook

219 Pages·2007·4.41 MB·English

QUANTITATIVE
INVESTMENT
ANALYSIS
WORKBOOK
Second Edition
Richard A. DeFusco, CFA
Dennis W. McLeavey, CFA
Jerald E. Pinto, CFA
David E. Runkle, CFA
John Wiley & Sons, Inc.

QUANTITATIVE
INVESTMENT
ANALYSIS
WORKBOOK
CFA Institute is the premier association for investment professionals around the world,
with over 85,000 members in 129 countries. Since 1963 the organization has developed

andadministeredtherenownedCharteredFinancialAnalyst Program.Witharichhistory
of leading the investment profession, CFA Institute has set the highest standards in ethics,
education, and professional excellence within the global investment community, and is the
foremostauthorityoninvestmentprofessionconductandpractice.
EachbookintheCFAInstituteInvestmentSeriesisgearedtowardindustrypractitioners
along with graduate-level finance students and covers the most important topics in the
industry. The authors of these cutting-edge books are themselves industry professionals and
academicsandbringtheirwealthofknowledgeandexpertisetothisseries.
QUANTITATIVE
INVESTMENT
ANALYSIS
WORKBOOK
Second Edition
Richard A. DeFusco, CFA
Dennis W. McLeavey, CFA
Jerald E. Pinto, CFA
David E. Runkle, CFA
John Wiley & Sons, Inc.
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LibraryofCongressCataloging-in-PublicationData:
Quantitativeinvestmentanalysisworkbook/RichardA.DeFusco...[etal.].—2nded.
p.cm.—(TheCFAInstituteinvestmentseries)
Includesbibliographicalreferences.
ISBN-13978-0-470-06918-9(paper)
ISBN-100-470-06918-X(paper)
1.Investmentanalysis—Mathematicalmodels. I.DeFusco,Richard
Armand.
HG4529.Q352006
332.601(cid:2)5195—dc22
2006052578
PrintedintheUnitedStatesofAmerica.
10 9 8 7 6 5 4 3 2 1
CONTENTS
PART1
LearningOutcomes,SummaryOverview,andProblems
CHAPTER1
TheTimeValueofMoney 3
LearningOutcomes 3
SummaryOverview 3
Problems 4
CHAPTER2
DiscountedCashFlowApplications 7
LearningOutcomes 7
SummaryOverview 7
Problems 8
CHAPTER3
StatisticalConceptsandMarketReturns 11
LearningOutcomes 11
SummaryOverview 11
Problems 13
CHAPTER4
ProbabilityConcepts 21
LearningOutcomes 21
SummaryOverview 21
Problems 23
CHAPTER5
CommonProbabilityDistributions 29
LearningOutcomes 29
SummaryOverview 30
Problems 31
v
vi Contents
CHAPTER6
SamplingandEstimation 37
LearningOutcomes 37
SummaryOverview 37
Problems 39
CHAPTER7
HypothesisTesting 43
LearningOutcomes 43
SummaryOverview 44
Problems 46
CHAPTER8
CorrelationandRegression 53
LearningOutcomes 53
SummaryOverview 53
Problems 55
CHAPTER9
MultipleRegressionandIssuesinRegressionAnalysis 67
LearningOutcomes 67
SummaryOverview 68
Problems 70
CHAPTER10
Time-SeriesAnalysis 83
LearningOutcomes 83
SummaryOverview 84
Problems 85
CHAPTER11
PortfolioConcepts 97
LearningOutcomes 97
SummaryOverview 98
Problems 102
PART2
Solutions
CHAPTER1
TheTimeValueofMoney 111
Solutions 111
Contents vii
CHAPTER2
DiscountedCashFlowApplications 129
Solutions 129
CHAPTER3
StatisticalConceptsandMarketReturns 135
Solutions 135
CHAPTER4
ProbabilityConcepts 149
Solutions 149
CHAPTER5
CommonProbabilityDistributions 155
Solutions 155
CHAPTER6
SamplingandEstimation 161
Solutions 161
CHAPTER7
HypothesisTesting 167
Solutions 167
CHAPTER8
CorrelationandRegression 175
Solutions 175
CHAPTER9
MultipleRegressionandIssuesinRegressionAnalysis 185
Solutions 185
CHAPTER10
Time-SeriesAnalysis 193
Solutions 193
CHAPTER11
PortfolioConcepts 199
Solutions 199
Aboutthe CFAProgram 205