CFA Level 3 (2021) | Capital Market Expectations: Grinold-Kroner Model

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CFA Level 3
Topic: Capital Market Expectations
Reading: Capital Market Expectations Part 2: Forecasting Asset Class Returns

The Grinold-Kroner model is used to estimate the return of equity markets, often referred to as a "supply" side model.

In the 2020 syllabus, the Grinold-Kroner model sees some updates on a few new sub-components (if compared to 2019 and before), notably:
growth rate of EPS
expected capital gains

There is also a long-run assumption which affects the calculation of the expected equity return.

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