Sneaky Little CFAI TRICKS examples, directly, following

Walex

Not sure if there is a thread on this already, but I figured it would be useful to start a thread with examples of questions that had little tricks to confuse us ...

CFA Mock 2010

Quant vignette - a couple of the questions require the 'standard error' term but it is nowhere to be found (directly). However, in the regression output, we have the following:

SPREAD (one of the independent variables)
Coefficient = 1.0264
t-statistic = 4.28

In the vignette, it says the analyst hypothesizes that the coefficient for SPREAD is actually equal to 1. Then, Q40 asks to calculate the t-statistic relating to the hypothesis that the SPREAD coefficient is 1.

So, how do we calculate the t-statistic for the analyst's hypothesis on SPREAD without the standard error for SPREAD? Remember, the t-statistic in the regression output is calculated assuming the null hypothesis that the coefficient = 0. So, from the regression output, we know:

t-statistic = (coefficient - 0) / Standard Error (SPREAD)
4.28 = 1.0264 / Standard Error (SPREAD)
Standard Error (SPREAD) = 0.24

Then, to answer Q40:

t-statistic = (1.0264 - 1) / 0.24

...I know that was lengthy, but I will add some shorter ones that I come across. Just wanted to see if other people noticed these tricky questions ...

ayaz_mahmud369

i wouldn't consider that very tricky, you just have to know how to get standard error given the t-stat and coefficient

ryanlb

It's annoying and that's the difference between the Schweser Mocks and the CFAI mocks and exams. CFAI makes you jump through algebraic hoops to get inputs for formulas, Schweser tests to see if you even know the formula.

Fortunately they only seem to make you do an algebra problem on formulas that are pretty simple, they don't have you jump through as many hoops on questions where there is a lengthy process involved.