NEW IN THE THIRTEENTH EDITION

The following is a guide to changes in the Thirteenth Edition. This is not an exhaustive road map, but instead is meant to provide an overview of substantial additions and changes to coverage from the last edition of the text.

Chapter 1 The Investment Environment

The chapter addresses recent controversies about stakeholder capitalism and ESG investing. It also further expands its treatment of Fintech, cryptocurrencies, and other digital assets.

Chapter 2 Asset Classes and Financial Instruments

The chapter addresses changes in markets, most notably the replacement of LIBOR with new rates such as SOFR.

Chapter 3 How Securities Are Traded

New sections on SPACs, order internalization, and the GameStop squeeze have been added to the chapter.

Chapter 5 Risk, Return, and the Historical Record

In addition to thorough updating, this chapter has been extensively reorganized to improve flow and understanding.

Chapter 10 Arbitrage Pricing Theory and Multifactor Models of Risk and Return

The discussion of multifactor models has been updated and expanded, with a focus on the adoption of new variants such as the Fama-French five-factor model.

Chapter 11 The Efficient Market Hypothesis

The debate on efficient markets has been further developed. The chapter now includes a discussion of Shiller’s fads hypothesis, as well as new material on extra-market risk factors, and a discussion of the challenges posed by data snooping for the interpretation of empirical evidence

on risk and return.

Chapter 12 Behavioral Finance and Technical Analysis

The material on behavioral finance now includes confirmation bias. The section on technical analysis includes a new discussion of machine learning.

Chapter 13 Empirical Evidence on Security Returns

This chapter has been extensively rewritten. Older material has been replaced with treatments of issues such as the so-called factor zoo, appropriate criteria for accepting a new risk factor, and the implications of disaster risk for the equity risk premium.

Chapter 15 The Term Structure of Interest Rates

Market segmentation is now included as another potential explanation of the term structure.

Chapter 17 Macroeconomic and Industry Analysis

The discussion of the macroeconomy has been updated to include lessons learned during the COVID-19 pandemic, particularly the implications of supply side and supply chain issues for inflation.

Chapter 23 Futures, Swaps, and Risk Management

The treatment of interest rate swaps has been updated to account for the transition away from the LIBOR rate.

Chapter 26 Alternative Assets

This chapter, originally entitled Hedge Funds now has a wider focus on Alternative Assets. It includes substantial coverage of private equity, including angel investing, venture capital, and leveraged buyouts.

Chapter 28 Investment Policy and the Framework of the CFA Institute

This chapter has been substantially reorganized, in particular, its treatment of tax sheltering and top-down asset allocation.