Real estate market and sector return drivers CFA Flashcards - Medical Study Cards
Master Real estate market and sector return drivers with Oncourse flashcards. These spaced repetition flashcards are designed for medical students preparing for NEET PG, USMLE Step 1, USMLE Step 2, MBBS exams, and other medical licensing examinations.
Real estate market and sector return drivers Flashcard Deck - 10 Cards
Flashcard 1: Nominal Default Free Bonds\
*Economic Forecasting*
Answer: - Longer term investors can forecast a trend real rate of return and changes in the level of inflation
- Increasing inflation and real rates = shorten duration
- Decreasing inflation and real rates = lengthen duration
- Shorter term trading requires more focus on increases/decreases in economic activity and the affect on interest rates and bond prices
Flashcard 2: Cobb-Douglas & DDM
Answer: Cobb-Douglas provides a macroeconomic forecast of the growth rate for the underlying economy and this is the base for estimating cash flow and dividend growth rates for dividend discount models.
For developed markets single stage model can be used as aggregate economic activity and dividend payouts are likely to be relatively stable.
For less developed economy the challenges are greater and the H-Model should be used. Challenges include:
- Economic data is less reliable
- Less direct link between economic and corporate cash flow
- Structural changes
- Volatile growth rates
The preference is to use real rather than nominal rates in models when estimating using CD as CD estimates the real growth rate.
Flashcard 3: Covariance (Long)
Answer: Cov(i,j)=Beta(i,1)\*Beta(j,1)\*Var(F1) + Beta(i,2)\*Beta(j,2)\*Var(F2) + (Beta(i,1)\*Beta(j,2)+(Beta(i,2)\*Beta(j,1))\*Cov(F1,F2)
Flashcard 4: Approaches to Economic Forecasting
Answer: 1. Econometric Models
2. Economic Indicators
3. Checklist Approach
Flashcard 5: Z-Scores
Answer: 5% = 1.65\
1% = 2.33
Flashcard 6: Covariance
Answer: 
Flashcard 7: Singer and Terhaar
Answer: The Singer and Terhaar model adjusts the ICAPM for market imperfections, such as illiquidity and segmentation.
For illiquidity compare the expected return from ICAPM and the return necessary to equate its Sharpe ratio to that of the market to derive the illiquidity premium.
For segmentation take the weighted average of the equity risk premium at full integration and full segmentation.
Flashcard 8: Commodities as an Inflation Hedge
Answer: Two factors affect whether a commodity is a good hedge against unexpected inflation: storability and demand relative to economic activity.
- Storable commodities have superior inflation hedging properties.
- Commodities that are most affected by the level of economic activity (energy, precious metals) tend to be better inflation hedges.
Flashcard 9: Financial Equilibrium Approach
Answer: The Financial Equilibrium Approach assumes that supply and demand in global asset markets are in balance. One such model is ICAPM:
Flashcard 10: Cash and Inflation
Answer: - Low inflation does not affect the return on cash instruments.
- Higher inflation is a positive for cash because the returns on cash instruments increase as inflation increases.
- Deflation is negative for cash because the return falls to almost zero.
Keywords: Real estate market and sector return drivers flashcards, medical flashcards, NEET PG preparation, USMLE Step 1 flashcards, Anki alternative, spaced repetition medical, Oncourse flashcards
