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CFA Level 1-Study Session Equity
CFA Level 1 - Equity, including the three functions of financial markets, securitization institutions, financial assets, instructions in the transaction process, efficient markets, etc. Essential Guide to High Scores for CFA Exam~
Edited at 2023-03-12 11:52:39
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Study Session 12-13 Equity
• R33 Market Organization and Structure
Markets, Assets, and Intermediaries
Functions of the Financial System
Main Functions of the Financial System
Achievement of Purposes in the Financial System
Return Determination
Allocation of Capital
Well Functioned Financial Market
Market Regulation
Application
Types of Financial Intermediaries
Hedger,Investor and Information-motivated trader
Brokers, Dealers and Exchanges
Brokers
Dealers
Exchange
Alternative Trading Systems (ATS)
Dark pools
Application
Securitizers
Asset backed security (ABS)
SPV/SPE
Depository Institutions
Insurance Companies
Arbitrageurs
Clearinghouses and Custodians
Classification of Assets
Financial Assets
Security
Fixed income vs. Equity securities
Fixed income security
Bond
Note
Bill
Commercial paper
Certificates of deposit
Repurchase agreements
Convertible debt
Equity securities
Common stock
Preferred stock
Warrants
Pooled Investment Vehicles
Mutual funds
ETFs/ETNs
Asset-backed securities
Hedge funds
Public vs. Private
Currency
Derivative contracts
Forward contract
Futures contract
Swap contract
Option contract
Insurance contract
Credit default swaps
Real Assets
Commodity
Real Estate
Classification of Markets
Money vs. Capital markets
Traditional vs. Alternative markets
Primary vs Secondary markets
Primary market
Sold Publicly
IPO (initial public offerings)
Seasoned offerings (secondary issues)
Underwritten Offering
Best Efforts
Indications of Interest
Book building
Application
Sold Privately
Private placement
Other transaction methods
Shelf registration
Dividend Reinvestment Plan
Rights Offering
Secondary Markets
When
Call Markets
Continuous Markets
How
Order-Driven Market
Order matching rules
Quote-Driven Market
Brokered Markets
Positions and Leverage
Long Position
Short Position
Payment-in-lieu
Short Rebate Rate
Leveraged Position
Buy on margin
Margin Requirement
Application
Margin Call Price
Call money rate
Leverage ratio
Application
Order Execution and Validity
Instructions of Transaction Processes
Execution instructions
Market orders
Limit orders
All-or-nothing orders
Hidden orders
Iceberg orders
Application1
Application2
Validity instructions
Day orders
Good-till-cancelled orders(GTC)
Immediate or cancel orders (fill or kill orders)
Application
Good-on-close orders
Good-on-open orders
Stop orders
Stop-sell order
Stop-buy
Application
Application
Clearing instructions
• R34 Security Market Indexes
Definitions about Market Indexes
Price index
Return index
Application
How an Index is Constructed
Weighting Schemes
Price-Weighted Index
Application
Equal-Weighted Index
Application
Market Capitalization-Weighted Index
A Float-Adjusted Market Capitalization-Weighted Index
Fundamental weighting
Value stock&Growth stock
Rebalancing and Reconstitution
Uses of Security-Market Indexes
Types of Indexes
Equity Indexes
Broad market index
Multi-market index
Sector Index
Style index
Fixed income indexes
Application
Alternative Investment Indexes
Commodity Indexes
Real Estate Indexes
Hedge Fund Indexes
• R35 Market Efficiency
Efficiency Market Hypothesis (EMH)
Three Forms of Market Efficiency
Weak-Form EMH
Semi-Strong EMH
Strong-Form EMH
Test of EMH
Conclusions of EMH
Market Anomalies
Time-series data
January effect
Tax-loss selling
Window dressing
Overreaction effect
Momentum effect
Cross-sectional data
Size effect
Value effect
Other identified anomalies
Closed-end investment funds
Earnings announcements
Initial public offerings
Economic fundamentals
Behavior Finance
Behavioral biases
Paranoid
Overconfidence
Narrow framing
Representativeness
Gambler's fallary
Conservatism
Self doubt
Herding
Mental accounting
Information Cascades
Profit and loss
Loss aversion
Disposition Affect
• R36 Overview of Equity Securities
Classification of Equity Securities
Public Equity Securities
Common Shares
Callable common shares
Putable common shares
Preference shares
Cumulative preference shares
Participating preference shares
Convertible preference shares
Private Equity Securities
Venture capital
Leveraged buyout(LBO)
Private investment in public equity(PIPE)
Investment in non-domestic equity securities
Direct investing
Global registered shares (GRS)
Depository receipts
Different Issuers
Sponsored DR
Unsponsored DR
Different Place
Global depository receipts (GDRs)
American depository receipts (ADRs)
Basket of listed depository receipts
Risk and return characteristics of equity securities
Equity returns
ROE
Equity risk
Cost of equity（Re）
• R37 Introduction to Industry and Company Analysis
The Uses of Industry Analysis
Industry Classification
Products and services they offer
Sensitivity to business cycles
Cyclical firm
Non-cyclical firm
Statistical methods, such as cluster analysis
Commercial vs. Governmenta
Peer group
Models
Industry life cycle model
Embryonic stage
Growth stage
Shakeout stage
Application
Mature stage
Decline stage
Michael Porter five forces
Rivalry among existing competitors
Threat of new entrants
Threat of substitute products
Bargaining power of buyers
Bargaining power of suppliers
Pricing power
Barriers to entry
Application
Industry concentration
Industry capacity
Market share stability
External Influences and Company Analysis
External Influences
Company Analysis
Three generic competitive strategies
Application
• R38 Equity Valuation: Concepts and Basic Tools
Discounted Cash Flow Models(Present value models)
Dividend discount model (DDM)
Dividend
Share Repurchase
Dividend Payment Chronology
Application
Valuing Preferred Stock
Valuing Common Stock
Gordon Growth dividend discount model (GGM)
Sustainable growth rate (g)
Dividend yield
Two-stage DDM
Application
Three-stage DDM
Free cash flow to equity model
Multiplier models
Price multiples models
P/E
Leading P/E
Application
Trailing P/E
Based on fundamentals
Application
Based on comparables
Law of one price
Enterprise value multiples models
EV/EBITDA
Enterprise value
EBITDA
Asset-based models
Application