CFA CFA Level 1 Quant, probability

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Quant, probability

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    • Avatar of Zee TanZee Tan
      Keymaster
        • CFA Charterholder
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        Probability of selecting a stock at random that is either a value stock or was selected by previous portfolio manager

        = Pvalue + Pgrowth by previous PM

        = 0.4 + (1-0.4) * (0.8)

        = 0.4 + 0.48

        = 88%

         

        jinkai voted up
      • Avatar of genesisx38genesisx38
        Participant
          • CFA Level 1
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          Hi Zee,

          Why is it assumed that the stock selected by the previous portfolio manager must be a growth stock?

          Shouldn’t it be a combination of Pgrowth by previous PM + Pvalue by previous PM?

           

          So would be Pvalue + (Pgrowth by previous PM + Pvalue by previous PM) – Intersection of the two (being value stock?)

          0.4 + [(1-0.4) * 0.8  + (0.6) * 0.7] – (0.7*0.6)   = 0.88? (Same answer but diff. logic)

          • Avatar of Zee TanZee Tan
            Keymaster
              • CFA Charterholder
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              Because if the selected stock was a value stock, that scenario is already covered by my first parameter (Pvalue). If I included it again I would be double counting. Hope that helps!

              jinkai voted up
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