CFA Institute Research Articles

“District Dialogs” Extend Policy Outreach

“Regardless of the views expressed, the elected officials participating in these District Dialogs gained a greater appreciation for the resource that CFA Institute can provide to policymakers.”

Prospects for and Ramifications of the Great Central Banking Unwind

At the CFA Institute Global Investment Risk Symposium held in Washington, DC, on 7–8 March 2013, William Poole gave a presentation on what he calls the “great central banking unwind.” Total assets on the balance sheets of the U.S. Federal Reserve and European Central Bank have exploded since 2008. The challenges and pressure faced by these and other central banks will probably have serious consequences for the global economy.

Fund Manager Bonus Caps Are Not the Answer

“CFA Institute is participating in the debate and raising concerns with European Parliamentarians in an effort to bring about a sensible alignment for the whole industry and those it serves.”

Improving Disclosure and Transparency for PRIPs

A new CFA Institute report examines policy recommendations for packaged retail investment products.

Promoting Professionalism in the U.K.

How one CFA Institute member society has worked to make professionalism in financial services a priority.

Practical Applications of Liquidity-Driven Dynamic Asset Allocation

The questions of how much risk to take on, and when, are ones that investment managers are continually negotiating as they chase greater returns. In <b><i> Liquidity-Driven Dynamic Asset Allocation</i></b>, which was published in the Spring 2013 issue of <b><i>The Journal of Portfolio Management</i></b>, the authors investigate firm-level liquidity risk and aggregate market risk and their relationship to each other. They show how investors can use aggregated market liquidity as a signal to time the overall market. This Practical Applications report is based on an interview with Co-Author <b>James X. Xiong</b>, Head of Quantitative Research at <b>Morningstar Investment Management</b>. Xiong describes the well-tested methodology the article introduces. He suggests that investors can use the methodology, known as the liquidity measure, to rebalance portfolios to enhance performance—over time, throughout liquidity cycles and between high- and low-liquidity-premium environments. Xiong’s co-authors are: <b>Rodney N. Sullivan</b>, Head of Publications at the <b>CFA Institute</b>, and <b>Peng Wang</b>, Investment Associate at the <b>University of Virginia Investment Company</b>. The bottom line: Use liquidity signals to construct asset allocation models. <b>TOPICS:</b>Portfolio construction, factor-based models, in markets

Financial Analysis at “Jungle Speed”

The CFA Institute Research Challenge wrapped up its seventh competition on 12 April in London with a new global champion: Wroclaw University of Economics. The five-member winning team from Poland included Jan Kasperowicz, Katarzyna Kowalczyk, Piotr Lembas, Kamil Saklaski, and Marta Szudzichowska, who served as the team’s captain. Szudzichowska explained that in addition to extensive preparation for each challenge event, an important element of the team’s winning strategy was their ability to handle stress. To relieve pressure and regain their focus, the team enjoyed playing a card game called “Jungle Speed.” “In the end, before our final presentation, only one thing really mattered: how to deal with the stress,” said Szudzichowska. “The card game really helped us cool off and enabled us to go into the Q&A session with clear heads.” As part of the research challenge competition, students worked in teams to write an initiation-of-coverage report on their assigned subject company. Some teams are then invited to present and defend their “buy,” “sell,” or “hold” recommendation to a panel of industry experts. This is no small task. Students spend hundreds of hours preparing for the competition while enrolled in full course loads (sometimes at the graduate level), working, and managing other personal and professional commitments. Team member Kamil Saklaski learned many lessons from the experience, especially when it came to collaboration. “The research report that we had to prepare on KGHM Polska Miedź S.A. required different expertise, approaches, and ideas. Each of us improved our analytical skills while working on each section, keeping in mind the whole structure and the character of our investment story. On the other hand, we gained a lot of ‘soft skills’ too, like teamwork, time management, task planning, and a broad array of presentation skills.” More than 3,500 students from more than 775 universities participated in local competitions held in 55 countries this year. Winners from each local-level competition, organized by volunteers at CFA Institute member societies, advanced to one of three regionals hosted by CFA Institute: Asia Pacific (held in Kuala Lumpur on 23 February), the Americas (held in Toronto on 21 March), and EMEA (held in London on 11 April). The winners from each regional then advanced to the final competition on 12 April and included:

Advancing Our Mission in China

“The creation of CFA Society Beijing and CFA Institute’s first Chinese-language publication mark only the beginning of CFA Institute’s deeper engagement in China as the country enters a new era, marked by a shift from an export-driven economy to a consumption-led one, increasing global economic and political clout, and rising personal wealth.”

Visible and Tangible Steps

“The 66th CFA Institute Annual Conference in Singapore offered delegates the opportunity to explore the challenges facing the financial industry and examine ways to help shape the future of finance and restore trust.”

Member Societies Provide a Bolder Voice

“[Member] societies potentially play an integral part in CFA Institute advocacy efforts by providing an expansive global delivery function and offering a local practitioner voice and influence.”

The academy-profession nexus in CFA partner programs

Purpose – The purpose of this paper is to comprehensively review one example of academic-industry cooperation, namely, the partnership arrangements between the CFA Institute and universities around the globe. There is a scarcity of literature relating to academic-industry cooperation between the finance discipline and business. Design/methodology/approach – Relevant data were hand-collected and a comprehensive analysis of individual CFA partner programs was undertaken, including the geographical distribution of the programs and program characteristics and ranking of partners programs; the motivation for and approaches of universities toward the CFA Institute partnership and program design are identified. The general findings are validated with a detailed analysis of the CFA partner postgraduate programs offered in Australian universities. Findings – The research finds that the primary focus of cooperation between the CFA Institute and universities is the adoption of practitioner-relevant academic curriculum in universities, which should assist in setting industry educational standards. The authors observed a great diversity of partner institutions and programs around the globe, their rankings and their approach to cooperation with the CFA Institute thanks to the flexibility of their partnership arrangements. This explains the rapid growth of universities seeking formal cooperation with the CFA Institute. However, this growth has created challenges for the CFA Institute in managing and delivering value in their partnership arrangements. Research limitations/implications – Due to data limitations, the research does not provide an empirical analysis of factors driving enrollments in Australian postgraduate finance programs. Practical implications – The paper serves as a guide to universities interested in engaging in cooperation with the CFA Institute. This study is also useful for the professional bodies that evaluate various models of cooperation with educational institutions. Originality/value – The paper is the first, to the authors' knowledge, to examine the practical aspects of cooperation between universities and a professional body in the finance discipline. Moreover, it is the first to evaluate perceived benefits and problems universities may experience by entering into a popular CFA Institute Partner Program.

On a New Approach for Analyzing and Managing Macrofinancial Risks (corrected)

At the fifth annual CFA Institute European Investment Conference on 19 October 2012 in Prague, Robert C. Merton gave a presentation on analyzing and managing macrofinancial risk. This article is based on his talk and on research he carried out with his coauthors.

How to Reform LIBOR: The Debate Continues

“Among CFA Institute members responding to the LIBOR survey, 89% agreed that a global framework of key principles or best practices should be developed for internationally used benchmarks.”

The Higher Standard

“Lawful conduct is not always ethical conduct, and CFA Institute promotes and requires both.”

Capitalism and Financial Innovation

At the 2012 CFA Institute Financial Analysts Seminar, held 23–27 July in Chicago, Robert J. Shiller discussed his view that capitalism must be constantly updated through innovation in order to be successful in its purpose of achieving society’s goals. Three recent innovations—the benefit corporation, crowd funding, and the social impact bond—are good examples of how finance and financiers can contribute to attaining these goals.

What Is the Future of Finance?

Why has CFA Institute embarked on a multiyear project, “The Future of Finance,” to determine how we as an organization and as individual members can contribute to a better future?

Ethical Decision Making

Ethical behavior extends beyond compliance to regulation. Ethical conduct demands a higher standard. Almost all investment professionals will at some time find themselves in situations that require them to actively choose to behave in an ethical manner, regardless of the immediate consequences for their career. CFA Institute is dedicated to supporting charterholders and all investment professionals in this very important endeavor.

Words, Actions, Will, and Ability

“Listening to the call from our members, CFA Institute has set strategic goals of bold action to promote our ethical values in the interest of society.”

Mission and Vision

Roger Urwin, chair of the CFA Institute Board of Governors planning committee, explains the new strategic plan.

An Experienced View on Markets and Investing

At the 65th CFA Institute Annual Conference in Chicago (held 6–9 May 2012), Robert Litterman interviewed Eugene F. Fama to elicit his views on financial markets and investing.