CFA三級培訓項目：經典題-資本市場預期（Capital Market Expectations）打印版

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Case:NeshieWakuluk

?NeshieWakulukisaninvestmentstrategistwhodevelopscapitalmarket

expectationsforaninvestmentfirmthatinvestsacrossassetclassesand

globalmarkets.Wakulukstartedhercareerwhentheglobalmarkets

wereexperiencingsignificantvolatilityandpoorreturns;asaresult,she

isnowcarefultobaseherconclusionsonobjectiveevidenceand

analyticalprocedurestomitigateanypotentialbiases.

?Wakuluk’sapproachtoeconomicforecastingutilizesastructuralmodel

inconjunctionwithadiffusionindextodeterminethecurrentphaseof

acountry’sbusinesscycle.Thisapproachhasproducedsuccessful

predictionsinthepast,thusWakulukhashighconfidenceinthe

predictions.Wakulukalsodetermineswhetheranyadjustmentsneedto

bemadetoherinitialestimatesoftherespectiveaggregateeconomic

growthtrendsbasedonhistoricalratesofgrowthforCountriesXandY

(bothdevelopedmarkets)andCountryZ(adevelopingmarket).Exhibit

1summarizesWakuluk’spredictions:

Case:NeshieWakuluk

Exhibit1PredictionforCurrentPhaseoftheBusinessCycle

CountryX

CountryY

CountryZ

InitialRecovery

Contraction

LateUpswing

?Wakulukassumesshort-terminterestratesadjustwithexpected

inflationandareprocyclical.Wakulukreviewsthehistoricalshort-term

interestratetrendsforeachcountry,whichfurtherconfirmsher

predictionsshowninExhibit1.

Case:NeshieWakuluk

?WakulukdecidestofocusonCountryYtodeterminethepathof

nominalinterestrates,thepotentialeconomicresponseofCountryY’s

economytothispath,andthetimingforwhenCountryY’seconomy

maymoveintothenextbusinesscycle.Wakulukmakesthefollowing

observations:

Observation1Monetarypolicyhasbeenpersistentlyloosefor

CountryY,whilefiscalpolicieshavebeenpersistentlytight.

Observation2CountryYisexpectedtosignificantlyincreasetransfer

paymentsandintroduceamoreprogressivetaxregime.

Observation3ThecurrentyieldcurveforCountryYsuggeststhatthe

businesscycleisintheslowdownphase,withbondyieldsstartingto

reflectcontractionaryconditions.

?WakulukdecidestofocusonCountryYtodeterminethepathof

nominalinterestrates,thepotentialeconomicresponseofCountryY’s

economytothispath,andthetimingforwhenCountryY’seconomy

maymoveintothenextbusinesscycle.Wakulukmakesthefollowing

observations:

?Observation1MonetarypolicyhasbeenpersistentlylooseforCountry

Y,whilefiscalpolicieshavebeenpersistentlytight.

?Observation2CountryYisexpectedtosignificantlyincreasetransfer

?Observation3ThecurrentyieldcurveforCountryYsuggeststhatthe

businesscycleisintheslowdownphase,withbondyieldsstartingto

reflectcontractionaryconditions.

Case:NeshieWakuluk

?Wakulukmostlikelyseekstomitigatewhichofthefollowingbiasesin

developingcapitalmarketforecasts?

Case:NeshieWakuluk

?Solution:A

Wakulukstartedhercareerwhentheglobalmarketswereexperiencing

significantvolatilityandpoorreturns.Sheiscarefultobaseher

conclusionsonobjectiveevidenceandanalyticalprocedurestomitigate

potentialbiases,whichsuggestssheisseekingtomitigatean

availabilitybias.Availabilitybiasisthetendencytobeoverlyinfluenced

byeventsthathaveleftastrongimpressionand/orforwhichitiseasy

torecallanexample.

C.imposesnoconsistencyofanalysisacrossitemsoratdifferent

pointsintime.

Case:NeshieWakuluk

?Solution:B

Wakuluk’sapproachtoeconomicforecastingutilizesbothastructural

model(e.g.,aneconometricmodelapproach)andadiffusionindex(e.g.,

aleadingindicator-basedapproach).However,thetwoapproacheshave

weaknesses:Aneconometricmodelapproachmaygiveafalsesenseof

precision,andaleadingindicator-basedapproachcanprovidefalse

signals.Twostrengthsofthechecklistapproachareitsflexibilityand

limitedcomplexity,althoughoneweaknessisthatitimposesno

consistencyofanalysisacrossitemsoratdifferentpointsintime.

Case:NeshieWakuluk

?Wakulukismostlikelytomakesignificantadjustmentstoherestimate

ofthefuturegrowthtrendforwhichofthefollowingcountries?

CountryZisadevelopingmarket.Less-developedmarketsarelikelyto

beundergoingmorerapidstructuralchanges,whichmayrequirethe

analysttomakemoresignificantadjustmentsrelativetopasttrends.

Case:NeshieWakuluk

?BasedonExhibit1andWakuluk’sassumptionsaboutshort-termrates

andexpectedinflation,short-termratesinCountryXaremostlikelyto

be:

Case:NeshieWakuluk

?Solution:A

CountryXispredictedtobeintheinitialrecoveryphaseofthebusiness

cycle,whichsuggestsshort-term(moneymarket)ratesarelowor

bottoming.Inflationisprocyclical.Itacceleratesinthelaterstagesof

thebusinesscyclewhentheoutputgaphasclosed,anditdecelerates

whenalargeoutputgapputsdownwardpressureonwagesandprices,

whichoftenhappensduringarecessionortheearlyyearsafterward.

Aslongasshort-terminterestratesadjustwithexpectedinflation,cash

isessentiallyazero-duration,inflation-protectedassetthatearnsa

floatingrealrate,whichistypicallyprocyclical.Wakulukassumesshort-

terminterestratesadjustwithexpectedinflationandareprocyclical.

Thus,short-termratesaremostlikelytobelowandbottomingif

CountryXisintheinitialrecoveryphaseofthebusinesscycle.

Case:NeshieWakuluk

?BasedonExhibit1,whatcapitalmarketeffectisCountryZmostlikelyto

experienceintheshort-term?

B.Monetarypolicybecomesrestrictive.

C.Theyieldcurvesteepenssubstantially.

Case:NeshieWakuluk

?Solution:B

Wakuluk’smodelpredictsthatCountryZ’sbusinesscycleiscurrentlyin

thelateupswingphase.Inthelateupswingphase,interestratesare

typicallyrisingasmonetarypolicybecomesmorerestrictive.Cyclical

assetsmayunderperform,whereastheyieldcurveisexpectedto

continuetoflatten.

?BasedonObservation1,fiscalandmonetarypoliciesinCountryYwill

A.lownominalrates.

B.highnominalrates.

C.eitherhighorlownominalrates.

Case:NeshieWakuluk

?Solution:C

MonetarypolicyhasbeenpersistentlylooseforCountryY,whilefiscal

policieshavebeenpersistentlytight.Withthiscombinationof

persistentlylooseandtightpolicies,theimpactcouldleadtohigheror

lowernominalrates(typicallylabeledasmid-nominalrates).

Case:NeshieWakuluk

?BasedonObservation2,whatimpactwillthepolicychangeshaveon

thetrendrateofgrowthforCountryY?

CountryYisexpectedtosignificantlyincreasetransferpaymentsand

introduceamoreprogressivetaxregime.Bothofthesechangesare

pro-growthgovernmentpoliciesandshouldhaveapositiveimpacton

thetrendrateofgrowthforabusinesscyclethatisinslowdownor

contraction.Transferpaymentshelpmitigatefluctuationsindisposable

incomefor