The Series 65 analytical component is where a lot of headaches are born. While trying to perfect the rules and regulations associated with state administrators, many people forget to brush up their analysis section. In today’s post, we recommend where you should focus.
Series 65 Analytical Component…Confusing, But Not too Mathematical
Much of the Series 65 exam includes some analytical topics. Some examples are Sharpe Ratio, beta, standard deviation, Rule of 72, among others. Many of these topics have math at their core. However, most of the math behind these theories go beyond the scope of this exam.
Some basic math is needed to understand some of these formulas nonetheless. And, some formulas such as the Rule of 72 might even be tested. That said, at Professional Exam Tutoring we recommend having the basic conceptual understanding is a good first step. For example, you should know the difference between beta and standard deviation. Beta is systematic risk whereas standard deviation is total risk – which is systematic risk plus non-systematic risk.
Other areas in the analytical section can also be confusing. Consider the Efficient Market Hypothesis (EMH).
Efficient Markets
The efficient market hypothesis is a common point of confusion. This section highlights three different markets as defined by modern portfolio theory.
- Weak form
- Semi Strong form
- Strong form
Each of these are backed up by some mathematics in academia, however, for this exam, all you need to know is the theory behind them.
For instance, the strong form hypothesis assumes that the market is always efficient and includes insider information, public information, as well as technical analysis (or chart reading). Therefore, the assumption on the exam is that nobody can beat the market, and an investor should only invest in an index fund as a result.
Other areas you may want to know for this exam aside from the rules and regulations at the state level, are things like calculating total return. Make sure you can calculate the total return of an investment when you consider the price change, plus dividends. Beyond this type of math, the exam does not get too heavy. It is very heavy on rules and regulations so that’s what you want to know best.
For any more questions or information, feel free to reach out! Good luck!