R2 CME - Forecast asset class return Flashcards
Ways to forecast returns
-Formal tools
-Surveys
-Statistical methods
F-Grinold-Kroner Method
F-CAPM
F-Singer terhaar
Loss given default, recovery rate, probability of default , counter or pro cyclical?
Loss given default, recovery rate, probability of default , counter or pro cyclical?
Steps to apply tehaar model
Steps to apply tehaar model
Given higher sharpe ratio of coutrie b vs a with will happen with S a/b
Currency with in base with higher sharpe will appreciate given the excess return
Fill the blanks: trade déficit of 4% what will happen with exchange rate
Donward pressure because current account déficit in profitable investment Will atract capital inflow as long atractive investment oportunities persist.
Fill the blanks: in the long run what component of grinold Kroner model converge to nominal gdp
All other equal 0, delta E converge
Relation of duration and capital Gain or loss
Micro attribution
Performance attribution applied to decision made ate the individual investment level.
F- fundamental factor model - Carhart model and how to read each factor?
Tip: RMRF, SMB, HML, WML
RMFM: equal igual to one suggest a diversified index
SML: equal to 1 sugest Focus on small caps
HML: equal to 1 Focus on high book to market
WML: equal to 1 Focus on momentum stocks
Examples of oportunities to obtan active return in FI funds (4)
Tips:
Duration, curve shape, sector selection, bond selection
What’s the difference between absolute vs. bottom up atribution
First one general risk arising from market, size, and style.
Bottom up focus from stock picking.
Explain why cap rate don’t has a prociclical nature like long term discount rates
Cap rate increase with interest rate but also influencied by downward pressure for debt over gdp.
Shrinkage estimation
Taking weighted avg to reduce impact of extreme values
F- expected return of E(R) of real estate
NOI/P+ NOI g - delta cap rate
