Reading 37: The Equity Valuation Process

I’m on a roll today I got done with this reading in about 1.5 hours. Since the Asset/Equity Val. book is really thick, I’m thinking of using Schweser to first quickly read through the entire chapter. Then, come back to the Curriculum and brush up over the different areas, read the examples and work out the end of chapter problems.

This is exactly what I did today and it saved me tons of time. Otherwise, I don’t think that I would have been able to wade through 30 odd pages in less than 1.5 hours (incl. the chapter end problems).

The main concept that you need to focus on is the ex-ante and ex-post alpha, which is really easy.

Ex ante alpha= Expected HPR- Reqd. HPR (Acc. to CAPM or FF Model)

Ex post alpha= Actual HPR- Contemporaneous HPR

Oh by the way, I just used the 2007 Schweser. Like I’ve mentioned, I won’t be buying 2008 Schweser stuff, except for the Qbank. No money