CFA L3 learning notes-CME-application of economic growth trend analysis to the formulation of CME
LOS-discuss the application of economic growth trend analysis to the formulation of capital market expectations
The trend rate of growth is a key consideration when setting capital market expectations.
1.DCF models incorporate the trend rate of growth.
2.higher trend rate of growth may offer equity investors good return if it has not been priced into the market
3.a higher trend rate of growth in the economy, means actual growth would be faster before inflation becomes a significant concern,which(inflation)influence monetary policy and bond yields
4.Faster trend growth implies higher average real yields.
Emerging countries often experience rapid growth as they catch up with the leading industrial countries, the more developed they become, the more likely their growth will slow.
bond yields will be pulled toward the trend rate of growth over time. We can express the aggregate market value of equity, as the product of three factors:
V^e, the aggregate market value of equity, S^k (earnings/GDP), and the P/E ratio (PE).
28 Jun 2023 - by toptradeready.com