It's CFA Level 1 Results Day!

Results for the CFA level 1 exam came out today. According to the CFA Institute, there was a 46% pass rate - the highest in years. I don't know if it was due to the move to 3-answer multiple choice questions or to a better-than-average candidate pool (there were probably a number of people out of work with extra time to study in there). Either way, congratulations to those who passed - you can now register for the Level 2 exam. If you didn't make it this time, you can take Level 1 again in December.

I have 3 former students (that I know of) who took the exam, and a couple more that were considering it. I expect the three I know of did well (hopefully, they'll let me know sometime today).

update: So far, two have reported in, and one passed - still waiting on the thrid.

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A Pretty Good Week (and Month) In the Markets

I try not to get too excited about short-term market movements. At the same time, I have to keep up since I'm the faculty advisor for Unknown University's St udent-managed fund. Even so, it's been a pretty good week (and month and year) so far - almost every equity index I can think of is in the green for the last month (and even year to date). As an aside, our fund is up 11.4% YTD (but I'm sure that'll change).




























click for larger image (courtesy of investmentpostcards.com)

High Impact Research

Most of what I do is not "high impact." Ah well- I yam what I yam.

South Park On Risky Banks

This will end up in my classes this fall.

Annnd poof! It's gone.

Here I Go Again!

As many of you know, I'm in the midst of taking the CFA (Chartered Financial Analyst) exams. I had been registered for the Level 3 exam this last June, but dropped out because of the Unknown Son's health issues (and I'm glad I did, because the time was much better spent with him in his last days).

Well, I just re-upped and re-registered for the 2010 exam. So, I'm once again a Level 3 Candidate. At least this time I'm already familiar with well over half the material, so it shouldn't be nearly as stressful.

I might even start early and keep with it this time around. With luck, I might be done with my first pass through he material by January 1. While that seems early, if I shoot for January 1, I'll probably actually finish by March or so, and then I can focus on actually locking this stuff down. After all, the material is interesting, but I don;t want to take any more exams for a while after this.

Happy 40th Anniverary, Moon Landing

I remember watching/listening to the Apollo 11 moon landing as it happened on the television. Hard to believe, but it's been 40 years since .

And yet, some conspiracy theory whack jobs still doubt that it happened. One moonbat (sarcasm intended) named Bart Sibrel systematically harassed the Apollo crewmembers to see if they'd admit that the landing was a hoax. He made the mistake of calling Buzz Aldrin a liar. Click below to see what happened.

Man - I could easily keep clicking this all day like one of those experiments where they gave mice crack.

"Garbage Research" and The Equity Risk Premium

Instead of the CCAPM (Consumption CAPM), we now have the GCAPM (Garbage CAPM). Alexi Savov (graduate student at U of Chicago) finds that he can explain much more of the Equity Risk Premium using aggregate garbage production than he can using National Income and Product Account (NIPA) data. Here's the logic behind his research (from Friday's Wall Street Journal article titled "Using Garbage to Measure Consumption"):

In theory, one way to explain the premium would be to look at consumption, a broad measure of wealth. People should demand a premium from an investment that goes down when consumption goes down. That’s because the alternative — bonds — hold on to their value when consumption declines. Another way to put it: When you are making lots of garbage, you are rich. When you stop making garbage, you are poor. Unlike bonds, which continue to pay out whether you produce lots of garbage (and are rich) or not, stocks are likely to lose their value during bad times. Therefore, investors should want a large reward for putting their money in something whose value decreases at the same time as their overall wealth decreases.

Unfortunately, the data typically used to measure consumption (the US Government's figures for personal expenditure on nondurable goods and services category in the National Income and Product Account) don't have a lot of variation. So, they don't work very well as an explanatory variable. Savov finds that whe he uses EPA records on aggregate garbage production, they're exhibit a correlation with equity returns that are twice as high as the NIPA/Equity returs correlations. Here's the abstract of his paper (downloadable from the SSRN):

A new measure of consumption -- garbage -- is more volatile and more correlated with stocks than the standard measure, NIPA consumption expenditure. A garbage-based CCAPM matches the U.S. equity premium with relative risk aversion of 17 versus 81 and evades the joint equity premium-risk-free rate puzzle. These results carry through to European data. In a cross section of size, value, and industry portfolios, garbage growth is priced and drives out NIPA expenditure growth.

Read the whole thing here.