LOS d: Explain the use of survey and panel methods and judgment in setting capital market expectations.

Q1. Which of the following regarding the setting of capital market expectations is least accurate?

A)   Judgment can be applied to project capital market expectations.

B)   Quantitative models should not be adjusted for an analyst’s subjective opinions.

C)   Capital market expectations can also be formed using surveys.

Q2. Which of the following regarding the setting of capital market expectations is least accurate?

A)   Surveys of practitioners have found them to be consistently more pessimistic than that of academics.

B)   Analysts should adjust the forecasts from quantitative models using judgment, when appropriate.

C)   When a fairly constant set of experts is polled, this method is referred to as panel method.

Q3. Which of the following describes a method of setting capital market expectations where a consistent set of experts is asked for their opinion regarding the future?

A)   An algorithmic method.

B)   A panel method.

C)   A market-adjusted algorithmic method.

LOS d: Explain the use of survey and panel methods and judgment in setting capital market expectations. fficeffice" />

Q1. Which of the following regarding the setting of capital market expectations is least accurate?

A)   Judgment can be applied to project capital market expectations.

B)   Quantitative models should not be adjusted for an analyst’s subjective opinions.

C)   Capital market expectations can also be formed using surveys.

Correct answer is B)

Although quantitative models provide objective numerical forecasts, there are times when an analyst must adjust those expectations using their insight to improve upon those forecasts.

Q2. Which of the following regarding the setting of capital market expectations is least accurate?

A)   Surveys of practitioners have found them to be consistently more pessimistic than that of academics.

B)   Analysts should adjust the forecasts from quantitative models using judgment, when appropriate.

C)   When a fairly constant set of experts is polled, this method is referred to as panel method.

Correct answer is A)

Studies have found that the expectations of practitioners are consistently more optimistic than that of academics.

Q3. Which of the following describes a method of setting capital market expectations where a consistent set of experts is asked for their opinion regarding the future?

A)   An algorithmic method.

B)   A panel method.

C)   A market-adjusted algorithmic method.

Correct answer is B)

Capital market expectations can also be formed using surveys. If the group polled is fairly constant over time, this method is referred to as a panel method.

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