equity: ibbotson-chen earnings model equity, where

leadcfa

where I could find the formula? It is not on the formula sheet. Thanks.

d2rockstar

is this on the test?

spreads

It’s depressing seeing something in a title of a thread and not having a clue what it is…

torontoanalyst

{[(1+InflationRate)(1+RealEarningGrowthRate)(1+PEratio)-1]+DividendIncome} - RiskFreeRate
It merely isolates the equity risk premium.

luckygiftvn

its a fundamental model
={(1+inflation rate)(1+ growth in gdp)(1+growth in P/E) -1}+ reinvestment rate on dividends - risk free rate
*there was a question in one of the vingettes i remember

stockjaguar

Not growth in GDP, i think it is growth in EPS.
[(1+EINFL)*(1+EGEPS)*(1+EGP/E) - 1] + EGINC - risk free rate
Where EGINC is expected growth in income, which can be dividends or coupons I believe.

Walex

growth in eps and growth in real gdp should be the same, and we assume they are. cfai text says if they are not then you adjusted real gdp.

therecruit

I will attempt to remember this if I’m scoring 85+ on mock exams. Until then (maybe next year if I fail), I’ll use my braincells on easier fish to catch.

Andreas42

I won’t even bother with this one.

HuskyGrad2010

It is an EOC question so it is fair game on the exam, one would think