Portfolio Management - Study Notes & References

Quick Reference

Core Formulas

Formula	Description	Module
$U = E (R) - \frac{1}{2} A σ^{2}$	Utility function	M01
$E (R_{p}) = R_{f} + \frac{E ( R _{i} ) - R _{f}}{σ _{i}} \times σ_{p}$	CAL equation	M01
$σ_{p}^{2} = w_{1}^{2} σ_{1}^{2} + w_{2}^{2} σ_{2}^{2} + 2 w_{1} w_{2} Cov_{12}$	2-asset portfolio variance	M01
$E (R_{i}) = R_{f} + β_{i} [E (R_{m}) - R_{f}]$	CAPM / SML	M02
$β_{i} = \frac{Cov ( R _{i} , R _{m} )}{σ _{m}^{2}}$	Beta	M02
Sharpe $= \frac{R _{p} - R _{f}}{σ _{p}}$	Sharpe ratio	M02

Key Concepts by Module

M01-M02: Quantitative portfolio theory (MPT, CAPM, performance measures)
M03-M04: Portfolio management process and construction (IPS, asset allocation)
M05: Behavioral biases (cognitive errors, emotional biases)
M06: Risk management framework and tools

Exam Weight

Portfolio Management typically represents 5-8% of the CFA Level 1 exam.

Additional References

Markowitz, H. (1952). “Portfolio Selection.” The Journal of Finance.
Sharpe, W. F. (1964). “Capital Asset Prices.” The Journal of Finance.
Kahneman, D. & Tversky, A. (1979). “Prospect Theory.” Econometrica.