5 Written questions
5 Multiple choice questions
- let past disasters or dramatic events weigh too heavily on their forecasts
- formulating capital market expectations, related to systematic risk
- 1. determine those needed
2. investigate historical performance
3. identify valuation model
4. collect good data
5. use judgment to interpret current investment conditions
6. formulate capital market expectations
7. monitor performance/refine process
- overly conservative in forecasts because you want to avoid the regret from making extreme forecasts that could end up being incorrect
- if the earnings yield is lower than the yield on the 10-year TSY, the investor would shift their money into the less risky TSY
4 True/False questions
Nine problems encountered in producing forecasts: → 1. Responsible fiscal and monetary policies?
2. What is the expected growth?
3. Does the country have reasonable currency values and current account deficits?
4. Is the country too highly levered?
5. What is the level of foreign exchange reserves relative to short-term debt?
6. What is the government's stance regarding structural reform?
shrinkage estimators → weighted averages of historical data and some other estimate, where the weights and other estimates are defined by the analyst
inventory cycle → often measured using the inventory to sales ratio
alpha research → formulating capital market expectations, related to systematic risk