- June 11, 2020
- Posted by: Fabian Moa, CFA, FRM, CTP, AFM, FMVA, FSA Credential
- Categories: CFA, CFA Level 2
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CFA Level 2
Topic: Equity Valuation
Reading: Return Concepts
The Ibbotson-Chen earnings model is covered under the reading “Returns Concept” for the topic Equity Valuation in the CFA Level 2 syllabus.
The model is used to compute the equity risk premium of an equity market/index.
The main components are:
– Expected inflation rate
– Expected growth in real EPS
– Expected growth in P/E ratio
– Expected income
– Risk-free rate of return
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