, ®
G)GARP
FRM I Financial Risk Manager
2024
®
EXAM PART II
Risk Management
and Investment
Management
@Pearson
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"Factor Theory," "Factors," "Alpha (and the Low-Risk Anomaly)," by Andrew Ang, reprinted from Asset
Management: A Systematic Approach to Factor Investing (2014), by permission of Oxford University Press.
"Hedge Funds," by William Fung and David A. Hsieh, reprinted from Handbook of the Economics of Finance,
Volume 2, Part B, pp 1063-1125 (2013), by permission of Elsevier B.V.
"Portfolio Performance Evaluation," by Zvi Bodie and Alan J. Marcus, reprinted from Investments, Twelfth
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"Predicting Fraud by Investment Managers," by Stephen G. Dimmock and William C. Gerken, reprinted from
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by permission of Elsevier B.V.
"Portfolio Risk: Analytical Methods" and "VaR and Risk Budgeting in Investment Management," by Philippe
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"Risk Monitoring and Performance Management," by Bob Litterman and the Quantitative Resources Group,
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"Performing Due Diligence on Specific Managers and Funds," by Kevin R. Mirabile, reprinted from Hedge Fund
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@Pearson ISBN 10: 0-13-829223-X
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, Contents
1.7 The Fall of Efficient Market
Chapter 1 Factor Theory 1 Theory 10
1.8 The 2008-2009 Financial Crisis
1.1 Chapter Summary 2 Redux 11
1.2 The 2008-2009 Financial Crisis 2
1.3 Factor Theory 2 Chapter 2 Factors 13
1.4 CAPM 4
CAPM Lesson 1: Don't Hold an Individual 2.1 Chapter Summary 14
Asset, Hold the Factor 4
2.2 Value Investing 14
CAPM Lesson 2: Each Investor Has His
Own Optimal Exposure of Factor Risk 5 2.3 Macro Factors 14
CAPM Lesson 3: The Average Investor Economic Growth 15
Holds the Market 5 Inflation 15
CAPM Lesson 4: The Factor Risk Premium Volatility 17
Has an Economic Story 5
Other Macro Factors 19
CAPM Lesson 5: Risk Is Factor
Exposure 6 2.4 Dynamic Factors 21
CAPM Lesson 6: Assets Paying Off in Bad Fama-French (1993) Model 21
Times Have Low Risk Premiums 6 Size Factor 22
1.5 Multifactor Models 7 2.5 Value Factor 23
Pricing Kernels 7 Rational Theories of the Value Premium 23
Pricing Kernels versus Discount Rate Behavioral Theories of the Value Premium 24
Models 7 Value in Other Asset Classes 25
Multifactor Model Lessons 8 Momentum 25
1.6 Failures of the CAPM 9 2.6 Value Investing Redux 27
iii
