Lecture #2 - Ec 136, Financial Economics Lecture 2...

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Unformatted text preview: Ec 136, Financial Economics Lecture 2 September 1 Outline for today 1. Nominal and real returns 2. Portfolios www.econ.berkeley.edu/~szeidl/ec136/ec136index.htm Readings for this week: BKM Chapter 3. 1. Nominal and real returns & Recall de&nition of return 1 + R = payo tmw price today & If purchasing power of dollar changes over time, need to measure payo and price in real terms. & Consumer Price Index, CPI t = dollar price of given consumption bundle on date t . { Growth rate in CPI is in&ation rate t +1 . & The real return on a stock is ( P t +1 + D t +1 ) =CPI t +1 P t =CPI t = 1 + R t +1 1 + t +1 = 1 + R t +1 t +1 1 + t +1 1 + R t +1 t +1 : & Real return nominal return minus ination rate. All Vanguard funds Click a fund name to view standardized returns, after-tax returns, fees, and expense ratio inform Set my default view: Performance ! " # $ % Price & Yield ! " # $ Table View ! " # $ Name Ticker Asset Class YTD as of 08/28/2009 Average Annual Returns as 1 Year 5 Year 10 Year & ' ) * 500 Index VFINX Stock - General 15.95% 19.91% 0.22% 1.26% & ' ) * Diversified Equity VDEQX Stock - General 21.34% 18.75% & ' ) * Dividend Appreciation Index VDAIX Stock - General 9.43% 14.34% & ' ) * Dividend Growth VDIGX Stock - General 10.15% 14.99% 3.11% 0.66% & ' ) * Equity Income VEIPX Stock - General 8.53% 17.89% 1.20% 1.73% & ' ) * FTSE Social Index VFTSX Stock - General 25.30% 21.29% 2.97% & ' ) * Growth and Income VQNPX Stock - General 12.39% 23.19% 1.41% 1.38% & ' ) * Growth Index...
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Lecture #2 - Ec 136, Financial Economics Lecture 2...

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