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This is exactly what I try to aim for - helping others to avoid the frustrations I ran into when I was learning this stuff myself! Really appreciate you letting me know it helped.

Also would doing the CFA level 1 exam be good for my cv or be any way beneficial if I pass?

If you are on the SAICA route, I would say don't even think about it until you have passed *both* the ITC and APC exams (or whatever they are called now). If you are not on a CA(SA)-track and you are genuinely good with the math-related stuff I would say go for it. The lack of investment management content in your degree will not stand in your way. And your ecos and accounting background will be a huge help. But you 150% definitely need more advice than just from me. Do PLENTY of due diligence before you push the button on this.

Yes! In fact, CFA Institute have started issuing digital certification badges for passing Level 1, that you can post to your LinkedIn profile. But Level 1 only gets you so far. It should not be your target endpoint.

​@@financefundamentals Thank you Mr Man I have decide to move the date to May and give myself enough time to prepare for the exam as its very expensive. I will also not be working and focus on mastering the contents and practicing, thank again!!! 🙂

Awesome! I wasn't making it up when I said that even senior professionals are sometimes clueless with this issue.

Remember that I am replicating the Hair et al results, and they did not start their PCA by normalizing their data first. If you are doing your own project and your step 1 was normalizing your data, then I would imagine that adding the "normalize" parameter will have no effect. Why not try both commands, "rotate" and "rotate, normalize" to see what differences (if any) you get?

Thank you so much for taking the time to leave a comment! It made my day to hear that the video helped you understand replication. It drove me crazy when I was a CFA candidate, and every year brings a new batch of my finance students who then also struggle with it. You are not alone!

Awesome! Happy I could help! Good luck with your Stata/PCA journey!

Thanks for taking the time to leave a positive comment! Appreciated!

Thank you for your comment/question! As I mentioned in the video, I'm not a statistics expert. Just a generalist interested in sharing knowledge about using Stata for various analyses. So you need to consider my response below while bearing that in mind. Regarding your specific question about which variable to remove due to cross-loading, a common approach is to consider both the statistical and theoretical aspects. From a statistical perspective, you would most likely remove the variable with the lower communality. (Based on the limited numbers you provided, this might be 'tour4' - but you need to check that column of your results.) However, you should also think about the theoretical relevance of each variable to your research question. Consider which variable is more meaningful to retain, based on your study's objectives and underlying theory. Sometimes a variable with slightly lower communality may be more crucial to keep from a conceptual standpoint. Another option to consider is trying the analysis with each variable removed in turn, and comparing the results to see which solution makes more sense and aligns better with your research goals.

Thanks! These techniques can be carried over into a number of seemingly unrelated parts of finance. Timelines really are a student's friend ...

Comments like this make the long hours of video creation seem worthwhile again. Thank you so much!

Thank you for the taking the time to comment! And I really appreciate the positive feedback.

Thanks for the positive comment!

Thank you! Appreciate the feedback!

Oh dear! That is not the right question ... Let me try to explain: LCM (lowest *common* multiple) and equivalent annual annuity (EAA) are two "competing" methods. BOTH of them are grounded in the replacement chain assumption. If there is not going to be a replacement chain, then you can't use either of them. But if there is no replacement chain, then you simply make your mutually exclusive project decision on the basis of NPV.

Awesome! Thank you for the generous feedback!

Remember that you would realistically be limited to a maximum of 3 factors if you wanted to visualise a plot. Here there are 4, which is why the source text used for this video does not try to show such a plot. 4-dimensional plots on a 2-D piece of paper are not strictly speaking impossible, but are unavoidably messy and hard to interpret.

First, I'd like to give you my gratitude for replying. Your answer makes sense as it provides little to no information making plot from these factors. What I had in mind was I tried to make time series graph in which there were plot lines of each factors (X axis is variable time and Y axis is the value of factors loadings). Perhaps there is a tutorial for making such graph? As always, thank you in advanced. @@financefundamentals

Interesting! If the startup really has no comparables at all, then you would probably need to use something other than CAPM to get your estimate of the cost of equity. In other words: you forget about trying to find a beta. Instead, you could, for example: (1) start with the risk-free rate and add a startup premium; or (2) use the ROI required by VC firms as a starting point. Whatever method you use, I think you should expect to have quite a big number for your Ke, reflecting the very high risks involved. Likely 20% (absolute minimum) - 30 - 50% or even more.

Great question! If there is no debt in the unlisted company (and this is also its capital target) then its D/E for the levering equation is zero. Then the unlisted company's levered beta is the same as its unlevered beta. To see this, apply the levered beta equation: beta(levered) = beta(unlevered)[1 + (1 - t)D/E] = beta(unlevered)[1 + (1 - t)0] = beta(unlevered)[1 + 0] = beta(unlevered).

@@financefundamentals Are you then saying unlevered beta for an unlisted company with zero debt is equal to 1? Therefore equal to the market beta?

@@quyenbui4008 No no no! At step 3 in the video, if the unlisted comapny had zero debt, then its D/E would be zero. Then the unlisted company's levered and unlevered beta would be the same, at 0.846. Why? -> beta(lev) = beta(unlev)[1 + (1-t)D/E] = 0.846[1 + (1 - 0.28)(0)] = 0.846[1 + 0] = 0.846.

[Time stamp: issue starts around 9.55] Take a careful look at all the loadings. Notice that for all variables, except for X11, there is one (and only one) factor that has a high loading. X11 is different. It does not have any loading that is as high as any of the others, with a maximum loading of only 0.6420. But that is not the main problem. Even worse, it has TWO loadings around 0.59 to 0.64. This is called a cross-loading. So X11 is dropped. A cross-loading is NOT defined as two loadings that are exactly the same. Instead you are looking for two or more high(ish) loadings on a single variable, which are greater than your chosen significance level.

Watch the video from 4:07 ...

Thanks for the feedback! Verification is absolutely the right approach. AI is developing so fast and has come a long way since I made this video in January, but it most certainly still has a *BIG* B.S. problem! Let the user beware ...

You're very welcome!

Thanks for the positive feedback! And a great follow-up idea too. Things have moved on fast since I published this just a few months ago, and it would be really interesting to see how the newer AI models deal with this issue.

There are a number of methods. I personally have used the approach in Anderson, TW and Rubin, H. 1956. Statistical inference in factor analysis. Proceedings of the Third Berkeley Symposium on Mathematical Statistics and Probability, 5:111-150.

Thank you!

Thank you for your kind words! I’m really glad you found the video helpful.

Thanks for the positive feedback!

Thanks! What an awesome comment. I feel humbled!

How was ur exam?..I am may 24 candidate

It's going to be an unpleasant surprise for any students who submit AI-generated work for grading, without fact-checking it first! Hopefully the professors will be vigilant!

Thank you!

That is a very good question! And I don't know the answer. CFAI says this on their website: "Your selected exam window must be 23 months or fewer before your graduation month for your bachelor’s degree or equivalent program. Understand that you must complete your degree program prior to the date of sitting your Level II exam." Say you register in good faith for your Level 1 exam 23 months before your *expected* grad date and pass. Then your circumstances change, and you only get your B degree after the 23-month window has closed. The delay could be for reasons that you do or don't control. Does your Level 1 pass get voided by CFAI?

Thank you!

Thanks!

The software is Sketchbook Pro, using a Huion graphics tablet.

Thank you for the positive feedback!

Glad you liked it! Thanks for taking the time to leave a positive comment!

You are most welcome!