Are you’re eyeing a career in asset management? Great choice! The field is challenging but rewarding. But how do you crack those job interviews? Let’s talk about your preparation.
Table of Contents
The Asset Pricing Course
Asset pricing isn’t just a subject; it’s the backbone of asset management. Get comfortable with the basics like the Modern Portfolio Theory, CAPM, and the Fama-French models. Don’t just read about them – try to understand how they apply in real-world scenarios. This will not only impress your interviewers but also give you a solid foundation to build on. Our Asset Pricing course discusses the following topics.
- Understanding Asset Pricing and Modern Portfolio Theory – Asset pricing is all about understanding how securities, like stocks and bonds, are priced. The Modern Portfolio Theory (MPT) is your starting point. MPT shows how to maximize returns while minimizing risk by diversifying your portfolio. Think of it as not putting all your eggs in one basket.
- Basic (Quadratic) Utility and Its Impact – Basic (Quadratic) Utility is a fancy term for a simple concept: investors prefer more wealth to less and are risk-averse. It helps explain how investors make decisions based on their preferences and the trade-offs between risk and return.
- Diving into the Capital Asset Pricing Model (CAPM) – The CAPM is a model that describes the relationship between risk and expected return. It’s used to price risky securities and calculate expected returns. Remember the name Fama and MacBeth (1973)? They’re the pioneers who tested the CAPM empirically, proving its practical relevance.
- Beyond CAPM: Fama and French Models – The Fama and French models build on CAPM by adding size and value factors to explain returns better. They introduced the ‘Two Factor Model’ and later expanded it in their 1992, 1993, and 2015 studies.
- Momentum and Mean Reversion: Key Concepts – In simple terms, momentum means that stocks that have performed well in the past tend to continue performing well. Mean reversion is the opposite – it suggests that returns eventually move back towards the mean or average. Both are crucial in predicting stock movements.
- Understanding Limits to Arbitrage – Arbitrage involves buying and selling assets to profit from price differences. However, there are limits to this practice due to risks and market inefficiencies, which you need to be aware of.
- Investment Sentiment and Market Anomalies – Investor sentiment significantly impacts stock prices. It refers to the overall attitude of investors towards a particular security or the stock market. Market anomalies, on the other hand, are scenarios where stocks deviate from their typical patterns, offering unique investment opportunities.
- Prospect Theory and Stock Returns – Developed by Kahneman and Tversky, Prospect Theory explains how investors make decisions in uncertain situations and how they value gains and losses differently. It’s a psychological angle on investment decision-making.
Coding Assignments
Programming is no longer optional in this field. Whether it’s Python, R, or any other language, being able to code is a must. Data is the new gold, and firms in this industry have enough data to keep you from the street for years. Make sure you’re able to apply basic ánd advanced statistic in coding. You won’t be the first if a firm asks you to showcase a regression analysis on their data set answer the appropriate questions in the assessment.
Brain Teasers and Probability Questions
Asset Management firms might put a little less focus on brain teasers and probability questions, compared to prop trading firms. However, they still occur. These types of questions are designed to assess your problem-solving skills, your logical thinking and creativity in approaching complex problems. Familiarize yourself with a wide range of brain teasers. Practice solving them under timed conditions to simulate the interview environment. You can use our brainteasers quiz and probability questions quiz to exercise with a wide range of different questions.
Start Preparing
Sign up for our quant trading package to cover all the topics you need to succeed for a career in asset management.
