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CFAI Mock A PM - Li (Question 3)
@ravivooda @vincentt Hi guys. I don't quite understand why VAR for SCIRP is being substituted in the multi-factor variance formula to find VAR of error term.
Is there an assumption I'm missing between SCIRP and CCIRP & TELIRP? What is the relation between these three indices?
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Comments
SCIRP: Mean 5.4% VAR 0.2704
CCRIP: Mean 4.6% VAR 0.0784
TELIRP: Mean 2.8% VAR 0.1024
Regression co-efficient: a = 0.011 b (CCIRP) = 1.02 b (TELIRP) = 1.045
Q: Based on the correlation of 0.25 that the team believes to exist between CCIRP and TELIRP, the new volatility is closest to?
A:56.4%
In schweser there's a note saying to memorise that formula only if you have the time otherwise it's negligible.