CIFA Advanced Level
Advanced Portfolio Management glossary
Every term this guide defines, A to Z, each with the chapter that teaches it. Open it when a word in a question is unfamiliar, and test yourself on it in the last week: cover the definition and say it in one sentence.
4 terms from the free first chapter
E
- Economic (fundamental) approach
Builds the forecast up from underlying economic drivers, for equities, the Grinold-Kroner-style decomposition already introduced in CIFA Equity Investments Analysis, under equity market equilibrium; for bonds, the yield-plus-roll-and-default-loss building blocks of the term structure covered in CIFA Fixed Income Investments Analysis.
Taught in Capital market forecasts
H
- Historical statistics approach
Uses long-run historical average returns, risk and correlation directly as the forecast, simple but assumes the future resembles the past, an assumption that can fail badly at turning points.
Taught in Capital market forecasts
S
- Shrinkage estimation
Blends a sample (historical) estimate with a more stable, structured target (such as the cross-sectional average across asset classes), reducing the estimation error that makes purely historical inputs unstable (the source of the minimum-variance frontier's instability).
Taught in Capital market forecasts
- Survey and panel approach
Aggregates the forecasts of a panel of economists or market participants, useful for capturing current market sentiment but subject to herding and behavioural bias (see behavioural finance in CIFA Portfolio Management).
Taught in Capital market forecasts
The full glossary adds every term from the other 12 chapters, A to Z, each with the chapter that teaches it.