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Capital Market Expectations
Capital Market Expectations
Medium
A positive technology shock permanently raises trend productivity growth from 1.5% to 2.5% per year. An analyst who continues using the historical 1.5% trend in her CME will most likely:
A
Systematically underestimate equity returns because the model underestimates sustainable earnings growth
B
Systematically overestimate equity returns because higher productivity reduces pricing power
C
Produce accurate equity return forecasts because equity returns are determined by risk premiums, not productivity
D
Produce accurate bond return forecasts but inaccurate equity return forecasts
Select an answer to continue
Tags
#exogenous-shocks
#productivity
#positive-shock
#trend-growth
#macro-analysis
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CFA Level III — Capital Market Expectations Practice Question | AcadiFi | AcadiFi