SERIES 66 EXAM ASKS QUESTIONS REGARDING THE SHARPE RATIO AND OTHER DESCRIPTIVE STATISTICS

  Taking the Series 66 exam? If so, be prepared for questions covering the Sharpe Ratio and various other descriptive statistics that analyze the price action of stocks. How do I know this? NASAA publishes Test Specifications for the Series 66 exam, and Section I (A) (2) covers the Sharpe Ratio and other analytical ratios and concepts.

Bob Eder discusses the Sharpe Ratio and stock statistical analysis in his Study for the Series 66 Exam. Here is an example of Bob Eder's treatment of the Sharpe Ratio:

EXAMPLE

Jimmy compares shares of ABC Corp. with shares of XYZ Corp. The standard deviation of XYZ's historical returns is 5, but the standard deviation of ABC shares is 3. If both ABC and XYZ generate an annual return of 30 percent above risk-free return, ABC has a Sharpe Ratio of 10 (i.e., 30 percent divided by 3). XYZ stock has a Sharpe Ratio of 6 (i.e., 30 percent divided by 5). ABC's higher Sharpe Ratio indicates ABC's return is less risky than that of XYZ. Jimmy thus buys shares of ABC.

Here is the link to NASAA's Test Specifications for the Series 66 Exam. See the references to the Sharpe Ratio in NASAA's Test Specifications, Section I (A) (2).

Study for the Series 66 Exam is available from Amazon in both paperback and Kindle e-book versions. Here is the link to Bob Eder's book on Amazon.

For questions about Bob Eder's Series 66 manual, Study for the Series 66 Exam, or questions in general about the Series 66 Exam, or about the Sharpe Ratio and other analytical ratios, feel free to email Bob Eder at bobeder@bobeder.net.

Bob Eder received his Juris Doctor (J.D.) degree from the University of Utah, Quinney College of Law, in 2001. See Bob Eder's Author Page on Amazon.com.