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    capital mrket expectations

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
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    Download as pdf
    8 views16 pages

    Captialmkt Expectations

    Uploaded by

    OladeleIfeoluwaOlayode
    capital mrket expectations

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
    Flag for inappropriate content
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    5 Cal © rap ear coretemotcom saree tontonane as 00% alata eal ual eal $F nese ‘Cap Mkt Exp-Asst Val-Asset Alloc - CME Foundation The UntedStales-based CME Foundation sive a wide vray of aren nrc Causes rfl seas ain county The nds vastmert poy stvemers aa fort alocton ranges fr mlor aes zee, cluding U.& tage, mid and smal ‘Zap locks, interaons egies, and domestic an eration bonds Mn oun ts ooo or te capa markets, CME Yypkatyapeles data om {GoboState Research onthe lal nvstable market (QI) andar asat ‘Shee to proce longterm asates or prema, sxpeted return, an sk ‘asarement Athough they has worked wih GibaStae for many yet Cl [Bevatistng th sion of RlaVal a comping research fi, va aa of Uruke he eauabem modeing aperasen apled to GloboSats dat, RieVal pretest use a mulfactr modsing approsch. Both eseech fms slo provide Short andlenguem seonome asi ‘CUE nes eakes Pauins Caner. cht investment ofc t ansze the bereft of ‘dng 8 real estate eqs as + permanent sesel clase To datrmin he “oproprate ik premium ard expected retin for is new asst clas, Carte: ‘nde a deermne tne appropriate na eto 9 ap tothe neratona apt) ‘esa pcg model (CAB) Selected data Fon GloboStats show i ENB xn Sslsted Data from GloboState ‘Standers | Cavsiance | aaa terete | Deviston_| “wing” | ‘winat US-realerae—|— tate —]— 0007S oa Global nvesaB Bisctes Eade Tas HTD 3m ‘Corts callnague Jason Grey ots het US. cal elas sa pat segmented Ade Using the data provided a Exhibit and assuming pete mates, the calculated bea for US. eal stat lose 108 038 sing fhe data provided in Exit 4 and Grey's scored apptatch and assumed coma fh expected ness 6%. Using he mulfactor model peed by Rival and Ext 2 he senda deviation ofS cel alates closest to: 245% 231% Cores’ steemant to ue the work oF bo fim fo determine a covariance waimate x ost ike an exam of 2 sinkage estimate s prosence ap onatnonnty ‘CME hex waked Paul Cotas, chit nic oct anal the ‘ding US reat state equi an 4 permanent sat class To deter Sppropiate sk premium ant expects retin fr hs new set les. Coe ‘onde la deers the appropri acto to apy tothe meatal ap {ese cing madel (CAP) Salaclad data ro SloboSat shown m ENB Y Exhibit Stincted Data rom GlaboStas Sandee] Covance | agar eset tne Deveson | “wincint” | yaneit eo a PRECties aie | Expected aun ore GO TAT a ‘matket For this reason, Grey rocammmends using the Singet—Terhaar approach to Ih ICAPMt and sesumes 3 coreiston 0038 Geweea W'S veal eeate athe ‘ore rvians FtaVa date(s 2) and pafaod wo factor mod wih soba ‘cay ad global bonds sete uo cammor divers of a ar a other sere exnwe2 olctod Data (om teal Tava ass Getal ego Pasa RET TS rl ae 350 7 ‘Soba tae 7 a saute Cassia ° -Kuecaieal Using he data provided Esha assaing ptict maa, the called bata fot US. a stat closest $08 ox Using he aap a Exit 1a Grey eucrmened approuc and assemed cveaton Bh expected tate fr 'S ea estat leet 1% sing he musta modal prefer by PVA an Ext? the senda deviation ofS cleats closet 245% ‘Cortes satarnnt oven the wrk ofboth um a dati covariance eatimat est ely an samp ok 4 shinkags estimate onettonenty (69 Cee cons 8 crate sence | Samm | Sata | saat | nee Us-waleeme—|— 140% [0007s O80 na ‘legs insessb= avat ee Tears areata Ricktes te | Expected ou forthe GIT ‘cones calleague Jason Grey notes that US rel estate sa party segments ‘mate Forti reason Gley faconmends using the Singer Tethaatsppaadh 12 {he CAPM and assumes a corslaton of 039 etwgen US. real esate tnd the cua Corts reviews tel dats (shit 2) and prefered wo factor mode ith aba Sian gotltontntsem connor anes olton ra cheat Sslncted Dat frm Real Fata Sees Tes GEA [Ciel Sande | RST ARE] US eal ese 3a a5 Te ut ‘leben ve 1 cn Saute Rae eS Vatanees a, TOE SerelalayEalsony gobi gales and gibal bonds OE ‘Gry makes he falloving abeestions about ha ho tloren ppeosches the ‘esearen fra use crate he repectve covariance maces "GoStats uses a istic sample esate covalances, wheteas “aealuss a target covariance mate by reiting sel cls rum to 3 Darul sto tra divers Ade Using the data provided In Exhibit and assuming pete makes, the calculate bea for US. eal state closest Using the data provided in Exit 4 and Grey's recorded aptouch and assumed crane expected 43% 6m, Using he mulfactor model peered by RilaVal and Exit 2 he sendard deviation ofS cel alates closest: 245% 231% ‘ris ine Lh Fr fo oer cia Stabe ie tw Seamed 1 sinkage estimate a pradence tap. nonsttonnty ‘bal trtar ve soutien r Vanaees 73 Tore Eovreltor Baiiees gba egies Hd iba bonds 05 ‘Gey makes tr folowing abssvaors about he wo een prance he ‘esearch fia aoe to ante ther reapacve covatance mabcee "obosiae ses hstxial sample esmalecoveiancer wheteas “Taal ures a are cosanea mar by rising na elms rns & paral st oetun ees ‘Gey recommends choosing the GidboSiats epproseh Cotes sates |leagres We vi ae tha costs ofboth fs by easing & ‘ay finds that Rta economic conn reveals «non consents iw on ‘any avesors tha te uence bank poy eventual esut = ‘eta fo sn equa expected Were nlata ‘such a9 Treugiry bons ad eal elo. should 6 wel because ofthe wrempected evvortd be uci Der When cb roare foe tgecod ite wet tulsa yt paver wa Cnt point out at Real vas an ecoometice approaéh ts ecoromic nals, wherons GebeStats palms eadingdcnor Saved sppromch Cae na Gry sco thes apprasenes at ang Cones conmris Tha big ecedvantage othe easing nator approach cali ‘inal Ratocaly watted becaua eaineanps betes puta noua One ‘ojradreriage fo he sconemetc approach quartaain estates al he ‘fain ha econo of changes sogeneusYanabic Cassia ° -Kuecaieal Using he data provided Esha assaing ptict maa, the called bata fot US. a stat closest $08 ox Using he aap a Exit 1a Grey eucrmened approuc and assemed cveaton Bh expected tate fr 'S ea estat leet 1% sing he musta modal prefer by PVA an Ext? the senda deviation ofS cleats closet 245% ‘Cortes satarnnt oven the wrk ofboth um a dati covariance eatimat est ely an samp ok 4 shinkags estimate onettonenty Na Otay cs irinne or ~ Corte reviews RiteVal data (Exh 2) and pefaed woactor mode ith aba Seay and glbl bonds ss he uo common divers sm ar other ses xn? Selected Dat from RteVol ator Sass Rese Gale quty_[ label Sands | —ResaaT RET] US alone 380 18 a souliee ‘oes ar or TH ae soutien To Toe Coven babraee aaa quer 6a Guba bonds 02 ‘ey makes he falowing abservations stout he wo deren approaches he researen fms ano t crete ho respective evaronee mates “"GioState eos 3 stra ample estate covstionces, whereas Fava asta sarge! covetanca mats by rlning soot cas reins 8 parole sto retrn Lory ecommands choosing the GlsboStat approach ‘crise sats | dsagrce We wl se the costs of bth fms by eaeatng @ ‘weighted average er sch covatlanceesinat ‘ey fn thet RteVakeeconamic commen towels 8 nan consensus view on ‘Sister, Specialy ey belre ie neoetoin pero of Coltre wilson ‘many mvestors bt ha te surert carat bank pay wl eventualy eeu = ‘rum an egulteom expectos ive oF nator ey stats: HRiValia come inthe neater ouincome producing stets, Stsh ae Treeoury bons and real saat shou Go al beans of re wsupactad 6%, ove 6% Using She mlfector model peered by RitzValand Exit 2. he standard deviation of US. real atte clos 210% 9 245% 21% Conse staomantto we the work o both fms to dotormino a covariances estimates most aly an oxangla ot © 2 erinkags ceimate a prodence ap Greys statemantragading the pct of RaVars aon sean is mo Incortae because otis comment about aus Cones comment with rgatdto te tus aiteret approaches te economic analy in st iy Ineorect because of he statement regarding lescng nator Ao ia ios Cap Mkt Exp-Asst Val-Asset Alloc - CME Foundation You have completed this assessment, “otal score: 2 out of 6, 39% ‘aveton Fedak slog the data prone in Ei 1 and assuming porfact markets, the caleulstod bata for U.S. realestate is closest 108 038, ‘Ths Untied Snts-based CME Foundation serves a wide vty ofhiman nest couse in ral seas ofthe cui. The fund's nvesment pli sttement sets forth allocation enges fr major asset classes, nung US. largo. mi. and ema Pa Rey resis. Br BE suestoathcom sees pests PC i el ine al a eee ca O ~ ibaa cinallaal mea) Find VaR by us the Sharpe ratio= Ro and SaNe fo Expacte eum = Rsk rate 12% -3.1%6= 4.1% (or0.081) Vara) = (011997 = 0.0130 00750.0130 = 0.50 2014 CFALevaim ‘Call Marat Expectaons"by John P CaWatley, Alan M. Mar, lan, Singot, and Renato Stub Section 3.1 Using he data provided in Exh 1 and Grays commanded approach and assumed coalaon, the axpocod rum fr US, real estat ls lseet 60%, 43%, om ‘rey recommends ho SIngor-Terhaar approach and 2coraaton of 39 between roa esata andthe mart Use thee step to sv forthe expected et: [ Fuly hiepaiod ik perio (aw 039-08) Tare step Fue Scomertea ak remium 140% «036)= 50% ie sie aes eee Fac x iia Leith eal Laelia ce © « Fae sulle I Sd Grey recommende he Singor-Tethaar approach and »corsaton of. 3@hemeen ra tte she market Us tonalite where apace ti Fay mgaisd a pO CC EESETES) Tare Step Ful segmered rok premiums rat c= 50 Fully pleated and segmented | (187m =06)* GOl=aay= | — 320% ‘romiam,conadering te dogee of Simp? Tipactd an aaa step Fu integrates ane segmented rk rem Rik re te 204 CFALarat ‘Capll MarketExpectalons "by John P Cabee, Al M Meder, ianD Singer ond Rens Staub Using te mutator model peiane ty Peal and Esnibt2 the standard davon of US rsa ctl. 2455 ey Foor, Ghbal Ey cor bal Bond — Ai ici ihe ty spat dsp ink ‘rem, considering th degree of ‘Step? Incograton [eile eles eal aad eakiaal © ~ anak oaslalae dae) Folly teats and senmentos ik rom + Riso rate Step 3 2014 GFALevetm ‘Cepia MareatExpesaons "by John P Caherley. Alan Mt Aer. ian D. Singer and Rensto Staub Secon 3.14 Using he mutator model peetared hy eV ane Evibt2. the sanders desiaton af US ee estate 210% 245%, 21%, ex Fact, Global Bonde onas*= ose srs 1510 oos7ax033 20002 Nera esa: = Fy =Factr1, Gobel Equty Nae (Fi) 0.0259" = 0460 war ona ConFFs)=cy0sp.2= 0.1818 90374029 = 0.002 Real estate face snstiios ae bg 06 for ans to global eqity and by 015 for global bonds, Residual sk variance (given) Var Vasance ofa! estate = B2 VAR( F )+ 62, .VARUP3)> 2p: Brg, 2COVUP), F2)+ Varn) (0.6) 0.025 + (0.18)? X 0.0014 +2 X06 x O15 x 0.002 ~ 0,048 = 9053392 ‘Square rot of varianes ie he stands dalton = 0.235, 023.1% 2014 CFALevatm ‘Cepia MorkatExpectatons"by John . Cabal, Alan Mt, Mecer, ian D,Singor and Renato Staub 2014 GFALevetm ‘Cpls Moret Expectations, "by John P. Cae. Alan Mt Meer, lan 0. Singer ond Renato Staub ‘Ct’ statment o use the wrk of bth ms to datermine ocovaince timate sist yan example a a ceotape saan a prusence ap Comec. Cortes alerentt calate a weight average forthe covariance estimate an example of shrinkage extinaton. Shikags estimation iobes taking weighted average of ahistorical estimate of porate and some her parameter asimata nwhch he waigr eet he analysts raatve bain te estinalas A shvinkage estimator he evarianea mae ies waite average ofthe tonal fmvarancs mat and an atest aimator ofthe covariance mar: 2014 CFALevat ‘pil Markat Expectation,” by John P. Calero, Alan M. Mer. Bian ©, Sing and Ranat Staub Secions 223,220, 31.12 (Gray eatoment rogaring the impact fiat ination sconari le moet ikay Inconect becouse otis comment abou real estte inconect because athis comment abot equtls eam Bee iss peceptonsho% DOC X ea earn eeels oil ale Sas Vig Siaulahee ea Incoret becouse of comment about real estate Inconel because ofhis comment about eats comes. ln dataton, rea estate erosions downward pring peeeure (negli) and bonds benef rom improving purchahy power (posve), Therefore, Grey's comment about el ata ie incerrct In

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