- This topic has 13 replies, 6 voices, and was last updated May-172:48 pm by
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Up0
Hi fellow L1 takers! I thought I’d break the silence to see how everyone’s doing, and whether there’s an opportunity to discuss any specific questions from anyone on the subject matter… I’ve been enjoying my readings, currently close to finishing Study Session 4 (microeconomics); I find the CFAI books pretty well-written on this!
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Up5
I still have not peeked ahead, but I might be able to help with this.
So we know that with collusion firms agree to avoid select competitive practices –such as price reductions (which they step-around by offering non-price incentives, e.g. reward cards, freq. flyer points). Since that undermines non-colluding competitors, I have to agree with @sakitime, if the number of non-colluding competitors is minimal and collusion efforts successful, the effect on the market sector will be substantial.
Firm-side, the causality would look something like: “successful collusion” leads to a portion of existing, non-colluding competitors dropping out of the market…leading to “abnormal profits” resulting in “new competition” attempting to overcome barriers to entry.
OPEC is a prime example of successful collusion.
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Up4
Yes post questions on the forum I always love to refresh the material I learned in level one and seemingly forgotten after the exam…lol
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Up4
@microeconomis, I haven’t reached CF yet, so can’t answer it for sure. I did a quick search for “leveraged beta” through the e-book on CF (vol. 4) but did not get a result – was it there that you came across it? (if so, what page?) If not, not sure it’s worth googling it at this point; if it’s not a term used in the CFAI text, it’s probably not going to show up in the exam…
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Up4
Thanks @sakitime and @microeconomist! I agree with you both, which means that the causal relationship in the book is a little weird (inverted). Otherwise, how could the degree of external competition affect the chances of a collusion being successful?
Anyway, I don’t think this is a major point, but just something that bugged me.
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Up3
Actually, I could use a quickie clarification from CF. Is it conventional for the terms “asset beta” and “unleveraged beta” to be used interchangeably? My understanding is that they are calculated the same way.
I just happen to be transcribing notes as I read the forum and thought I would ask.
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Up2
Sounds good, @microeconomist. I’ll be interested in learning your opinion – which could very well differ from mine given your familiarity with the subject.
I think as long as you can adjust your schedule, it should be fine. Me too, I’ll likely need to push the date when I’ll have finished my reading by a week, as I learned we’ll have friends over the last week of August. This will still give me about 5 weeks between end of readings and exam, for practice questions, mock exams, etc. While I hope to stick to the adjusted calendar as much as possible, there’s always a risk of something else creeping in and another adjustment is needed…
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Up2
@microeconomist, @edulima just re-started by studies again. Re-read my Eleventh hour as a warm up, then now diving into my problem areas (FRA, Fixed Income in particular).
So far so good – a lot of topics I was struggling to understand in the last weeks of the previous exam under pressure seems a lot more understandable now. At least if/when I pass I’ll do so with a better understanding of the subject too 🙂
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Up2
@edulima, I appreciate your response and figured the usage was different according to world region (still not sure about that tho). I was looking up financial models outside the text and it appears “asset beta” “unleveraged beta” & “unlevered beta” are, for the most part, used interchangeably. I’m glad the CFAI sticks to one term.
Study Well ~O)
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Up2
@edulima I guess collusion would be more successful when it attracts more competition, however I think the point is that when there is less competition outside of the colluding parties the act of collusion has a greater affect. @microeconomist please feel free to correct me if you thought otherwise
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Up1
@policedog, this sounds great! Of course you’ll get it this time, as it sounds you are taking the right steps. Let’s use this forum to our advantage: posting questions for discussion as needed, mutual encouragement, sharing studying “best practices”…
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Up1
I’ve got a question from Reading 16 (for those who have gotten to that point): in the section on Oligopoly (page 177, vol.2), the last of the six major factors that affect the changes of successful collusion (the degree of external competition) seems to be more a by-product of a successful collusion rather than a causing factor, from what I can see. I am confused about the causal relationship: is the collusion more successful when it attracts more (or less???) competition; or is it the other way around?
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Up0
@edulima That is good to hear, I look forward to seeing how the CFAI material treats my third love. I must resist the urge to peek before the calendar permits :-w (I’m already behind schedule)
When finishing a topic in the middle of the week, I have been filling out the rest of that particular week with practice questions. Those days add up so now the calendar is laughing at me for being behind schedule. No worries though, I’ve always been able to Suffer Well.
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