Securities Markets

Functioning of securities markets (CFA Level I Suggested Reading)

  • The characteristics of a well-functioning securities market and the relationship between the primary and secondary capital markets
  • The structural differences among national stock exchanges, regional stock exchanges, the OTC market, and the "third" and "fourth" markets
  • The major characteristics of exchange markets, including exchange membership, types of orders, and market makers
  • An investor's likely motivation for selling short, the processes and the technical points affecting short sales
  • Buying a stock on margin, the rate of return on a margin transaction, the maintenance margin and the stock price at which the investor would receive a margin call
  • The major effects of the institutionalization of securities markets

Securities Market Indexes (CFA Level I Suggested Reading)

  • The composition and characteristics of the three predominant weighting schemes used in constructing stock market indexes
  • The source and direction of bias exhibited by each of the three predominant weighting schemes
  • A price-weighted and a value-weighted index series for three stocks
  • The major structural features of domestic and global stock indexes, bond indexes, and composite stock-bond indexes
  • The earnings per share (EPS) and expected PE ratio (earnings multiplier) of a stock market series
  • The expected rate of return for a stock market series

Efficient markets (CFA Level I Suggested Reading)

  • The arguments supporting the concept of efficient capital markets
  • The efficient market hypothesis (EMH) in each of its three forms
  • Two sets of tests used to examine the weak form of the EMH and two sets used to examine the semi-strong form of the EMH
  • Six market anomalies and explain their implications for the semi-strong form of the EMH
  • The overall conclusions about each of the three forms of capital market efficiency
  • The implications of stock market efficiency for technical analysis and fundamental analysis and the role of a portfolio manager in a perfectly efficient market

Best Execution (CFA Level III Suggested Reading)

  • Costs involved in the execution of a trade and the concept of best execution
  • Why best execution is a broader concept than transaction cost analysis
  • Problems in defining best execution
  • Benchmarks used by traders to measure best execution

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