5 Written questions
5 Multiple choice questions
- weighted averages of historical data and some other estimate, where the weights and other estimates are defined by the analyst
- 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
- too much weight on the first set of information received
- 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?
- concerned with earning excess returns through the use of specific strategies within specific asset groups
4 True/False questions
inventory cycle → r_target = r_neutral + [0.5(GDP_exp - GDP_trend) + 0.5(i_exp - i_target)]
Nine problems encountered in producing forecasts: → 1. limitations to using economic data
2. data measurement error and bias
3. limitations of historical estimates
4. the use of ex post risk and return measures
5. non-repeating data patterns
6. failing to account for conditioning information
7. misinterpretation of correlations
8. psychological traps
9. model and input uncertainty
prudence trap → too much weight on the first set of information received
recallability trap → let past disasters or dramatic events weigh too heavily on their forecasts