The Investment Advisor Body of Knowledge + Test Bank

The complete body of knowledge for CIMA candidates and professionals

The 2015 Certified Investment Management Analyst Body of Knowledge + Test Bank will help any financial advisor prepare for and pass the CIMA exam, and includes key information and preparation for those preparing to take the test.

CIMA professionals integrate a complex body of investment knowledge, ethically contributing to prudent investment decisions by providing objective advice and guidance to individual and institutional investors. The CIMA certification program is the only credential designed specifically for financial professionals who want to attain a level of competency as an advanced investment consultant. Having the CIMA designation has led to more satisfied careers, better compensation, and management of more assets for higher-net-worth clients than other advisors. The book is laid out based on the six domains covered on the exam:

• I. Governance
• II. Fundamentals (statistics, finance, economics)
• III. Portfolio Performance and Risk Measurements
• IV. Traditional and Alternative Investments
• V. Portfolio Theory and Behavioral Finance
• VI. Investment Consulting Process

Acknowledgments vii

Introduction xi

Chapter 1 IMCA Code of Professional Responsibility and Standards of Practice 1

Chapter 2 Regulatory Considerations 37

Chapter 3 Statistics and Methods 47

Chapter 4 Applied Finance and Economics 105

Chapter 5 Global Capital Markets: History and Valuation 235

Chapter 6 Attributes of Risk 307

Chapter 7 Risk Measurements 321

Chapter 8 Performance Measurement and Attribution 333

Chapter 9 Traditional Global Investments: Equity and Fixed Income 393

Chapter 10 Fixed-Income Vehicles 471

Chapter 11 Foreign Exchange Market 547

Chapter 12 Alternative Investments 569

Chapter 13 Options, Futures, and Other Derivatives 651

Chapter 14 Tools and Strategies Based on Technical Analysis 703

Chapter 15 Portfolio Theories and Models 759

Chapter 16 Behavioral Finance Theory 815

Chapter 17 Client Discovery 899

Chapter 18 Investment Policy Statement (IPS) 997

Chapter 19 Portfolio Risk Management Strategies 1017

Chapter 20 Manager Search, Selection, and Monitoring 1049

Chapter 21 Perform Portfolio Review and Revisions Process 1083

IMCA 1103

About the Author 1105

Index 1107

About IMCA
Established in 1985, IMCA is a nonprofit professional association and credentialing organization with more than 10,000 individual members and certificants in the United States and Canada, including 400 international affiliate members. IMCA members collectively manage more than $2.477 trillion, providing investment consulting and wealth management services to individual and institutional clients. Since 1988, IMCA has offered the Certified Investment Management Analyst^® (CIMA^®) certification, which earned accreditation by the American National Standards Institute (ANSI) in April 2011, making it the first financial services credential in the United States to meet international standards (ISO 17024) for personnel certification.
IMCA^® and Investment Management Consultants Association^® are registered trademarks of Investment Management Consultants Association Inc. CIMA®, Certified Investment Management Analyst^®, CIMC^®, CPWA^®, and Certified Private Wealth Advisor^® are registered certification marks of Investment Management Consultants Association Inc. Investment Management Consultants Association Inc. does not discriminate in educational opportunities or practices on the basis of race, color, religion, gender, national origin, age, disability, or any other characteristic protected by law.

As today's complex investing landscape continues to evolve, investors need guidance from well-trained, certified advisors now more than ever. The Certified Investment Management Analyst^® (CIMA^®) certification program is the only certification designed specifically for financial professionals seeking advanced skills and knowledge required to serve retail and institutional clients' sophisticated investment needs.

The CIMA certification is also the only internationally accredited financial services certification in the United States. In April 2011, the American National Standards Institute (ANSI) awarded international accreditation to CIMA certification, setting it apart from the hundreds of designations in the opaque financial services credentialing marketplace. Simply put, CIMA certification is regarded as the standard for investment advice.

International accreditation is one of many reasons CIMA certification directly contributes to advisors' success. CIMA professionals report being more satisfied with their careers, earning better compensation, and managing more assets for higher-net-worth clients than other advisors, according to research conducted by the Aite Group.

Whether you're beginning the CIMA certification process or seeking to further your investment advisory expertise, The Investment Advisor Body of Knowledge is an invaluable resource to help you advance your career and become a better investment advisor.

"If you specialize in working directly with clients to develop investment policy, select a portfolio of outside money managers, and evaluate and monitor the portfolio over time, the CIMA program is the best education available. Period."
—Kevin M. Sánchez, CIMA^®, CPWA^®, CFP^®

The curated guide to aid in your studies for the CIMA^® qualification and certification exams

The Investment Advisor Body of Knowledge is a comprehensive text designed for anyone preparing for the Certified Investment Management Analyst® (CIMA®) certification process. Content is aligned with the certification's six core topic domains and covers the most relevant subject matter from expert practitioners and academics. Each of the 21 chapters contains learning objectives and summaries to guide you through the preparation process. The readings clearly explain key financial and investment concepts, theories, and applications while highlighting calculations and applications tested on the CIMA qualification exam and the CIMA certification exam.

Supplementary material included with The Investment Advisor Body of Knowledge helps simplify the study process. With practice questions covering each section, the companion website helps readers gather and retain new information.

The Investment Advisor Body of Knowledge was developed specifically to cover CIMA certification curriculum topics, though any investment advisor may use this valuable material to gain an intimate understanding of investment theories and models that may be implemented—and ultimately transformed—into sound investment solutions for clients.