Reading 24: Macroanalysis and Microvaluation of the Stock M valuation, economic, between, leading

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CFA Institute Area 6: Economics
Session 6: Economic Concepts for Asset Valuation in Portfolio Management
Reading 24: Macroanalysis and Microvaluation of the Stock Market
LOS a: Contrast leading, lagging, and coincident economic indicators and explain the relationship between these cyclical indicator categories and stock market valuation.

[此贴子已经被作者于2008-9-16 17:48:17编辑过]

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The best indicator of future stock performance is through the use of:

A) coincident indicators.

B) leading indicators.

C) lagging indicators.

D) diffusion indicators.

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Answer and Explanation

Analysts will want to focus on the leading economic indicators because they would provide an indication of the future health of the stock market.

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If the ratio of the coincident index to the lagging index is rising but then starts to slow, this may indicate:

A) the beginning of an upturn in the economy.

B) the beginning of increased volatility in the economy.

C) the beginning of a slowdown in the economy.

D) the beginning of decreased volatility in the economy.

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Answer and Explanation

The ratio of the coincident index to the lagging index is used by some analysts to forecast the economy. If the ratio is rising but subsequently starts to slow, this may indicate the beginning of a slowdown in the economy.

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Which of the following is NOT a leading economic indicator?

A) Changes in the money supply.

B) The prime rate charged by banks.

C) Stock prices.

D) The spread between long-term and short-term interest rates.

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Answer and Explanation

The prime rate charged by banks is not a leading economic indicator, it is a lagging indicator.