alpha is in excess of beta. For example, stocks return 8% with a std of 16% but your stock selection portfolio did 12% with the same risk. That’s “4% alpha” (super simplistic but just an example). If you’re doing trend following then your beta is the benchmark of trend followers. in the above example, you were able to generate 4% above the benchmark. How? You might say “we found that companies exhibiting XYZ characteristics tend to outperform the market” — that’s an anomaly to EMH right? If EMH says all things are priced in and you find something that’s not, then you found an exception to the rule. Note: if your standard deviation (“std”) goes up then you are in fact aligned to EMH (because in EMH you can only make more returns if you take on more risk). active risk is the difference between your portfolio and the benchmark. E.g. say a 60/40 portfolio is 60% equity and 40% bonds. Because you’re worried about the market you underweight equities — so your mix looks like 30%/70%. If you beat the 60/40 benchmark, you did so because you took active risk on your equity underweight.
a) screening according to track record (middle and senior), assessment tests, stats/math/probability questions (junior, new grads) b) a: a - firms with a focus on generating returns for shareholders and investors, where returns are the primary focus and hence a desire to hire those who have the capability to contribute to such goal b - firms that are woke or conformist (run as fast as you can whenever you hear someone talk about ESG in regards to investment management or trading...). Firms that overly focus on degrees, certificates, school names, paper accomplishments rather than accomplishments and contributions in the real world. Sometimes a and b exists in the same firm, so it comes down to specific teams/groups.
@longshort This is exactly what I needed as clarifications. Clear as clear skies. Thanks! @M.W. thanks so much to you also but I have more questions: Can you give an example of assessment test? Regarding the leagues, I need names please. Who's in league A in your opinion? Who's in league B? This made me lol
Assessment test: to test different capabilities and skills that all relate to trading and making investment decisions. Can't name specific questions as it really depends what job is on offer. Lots of Boston based long only funds have an absolute fetish for CFAs, CPAs, and basically anyone who can write books about ESG and the like. You must feel warm and fuzzy about tight knit family like team structures where colleagues congregate with their families at parks for picnics and of course lack of knowledge of baseball immediately disqualifies you. I never ever understood how knowledge and interest in organized (aka commercialized) sport viewership correlates with being successful at handling trades and company research and investment idea generation but you won't get very far with those firms if you expose your distaste for American sports. Notice how I speak of viewership not the qualities of the actual athletes.
If by "unlearning" you mean you have to kick the habit of thinking linearly along EMH, I guess you are right. I just merely took the theory as an academic tool rather than a trading skill set.
I’m sure you found your calling in the Back-Office or Hr, where you could gab about the Gaga concert or reruns of Friends.
Another CFA Charterholder here. The entire CFA journey taught me discipline and gave me the "winner" attitude, that I can achieve anything I set my mind to it. Also, it helped me in my private equity career. Generally, it really does open the door into portfolio management and the like. But although CFA curriculum does mention TA, the entire focus is on fundamental analysis. For the TA, the CMT is much better qualification. And the next thing I will most likely go after https://cmtassociation.org/chartered-market-technician/
Just one thing to consider - CFA is much more known and will open much more doors for you. CMT is a bit more nichy and you are much more limited, various hedge funds, or various trading floors would be interested in you as a candidate. Also, with the CFA title you are often pardoned first level of various other professional qualifications.