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equity: ibbotson-chen earnings model

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

is this on the test?

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

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{[(1+InflationRate)(1+RealEarningGrowthRate)(1+PEratio)-1]+DividendIncome} - RiskFreeRate

It merely isolates the equity risk premium.

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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

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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.

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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.

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I won't even bother with this one.

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

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yeah, i had this question about a month ago too (because its an EOC).

i'm going to ignore it - cant imagine more than one question. And if it does come up, i'm assuming one of the "wrong" answer choices will be like the CAPM calculation or something - so i will hopefully be able to eliminate bad choices..

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