Long-Run Global Capital Market Returns and Risk Premia
Elroy Dimson
London Business School
Paul Marsh
London Business School
Mike Staunton
London Business School
Abstract
Investors have too often extrapolated from the American experience and from relative
INTERNAL/
EXTERNAL
Semester One, 2012
Unit Code and Title
STANDARD PAPER
ECF3327 Investment Finance III
Duration
Reading time
Working time
Total time
5 minutes
3 hours
3 hours 5 minutes
Attempt
All questions in Section A
Two(2) questions out of Three(3) i
INTERNAL
Semester Two, 2011
Unit Code and Title
STANDARD PAPER
ECF3327 Investment Finance III
Duration
Reading time
Working time
Total time
5 minutes
3 hours
3 hours 5 minutes
Attempt
All questions in Section A
Two(2) questions out of Three(3) in Section
INTERNAL/
EXTERNAL
Semester One, 2011
Unit Code and Title
STANDARD PAPER
ECF3327 Investment Finance III
Duration
Reading time
Working time
Total time
5 minutes
3 hours
3 hours 5 minutes
Attempt
All questions in Section A
Two(2) questions out of Three(3) i
INTERNAL
Semester Two, 2010
Unit Code and Title
STANDARD PAPER
ECF3327 Investment Finance III
Duration
Reading time
Working time
Total time
5 minutes
3 hours
3 hours 5 minutes
Attempt
All questions in Section A
Two(2) questions out of Three(3) in Section
INTERNAL/
EXTERNAL
Semester One, 2010
Unit Code and Title
STANDARD PAPER
ECF3327 Investment Finance III
Duration
Reading time
Working time
Total time
5 minutes
3 hours
3 hours 5 minutes
Attempt
All questions in Section A
Two(2) questions out of Three(3) i
ECF3327 INVESTMENT FINANCE III
Final Exam
Answers to Numerical Problems
Semester 1/10
Question 3
(A) i)
E(RP) = 11%
P = 1.025
Question 4
(B)
Net foreign return = 25.85%
Question 5
(A)
1 wX X wY Y 0
E (r1 ) 0.02
2 wX X wZ Z 0
E (r2 ) 0.04
3 wY Y wZ Z 0
E
ECF3327/ECF5321 - Lec 12
Objectives Week 12
Topic 8
Market Efficiency
Market Efficiency
Appreciate the different types of efficiency
and how they apply to the financial markets
The concept and evidence
Understand the role of information in setting
the rol
ECF3327/ECF5321 - Lec 11
Objectives Week 11
Performance Evaluation
Topic 7
Calculate a range of performance measures for
investment portfolios
Discuss and analyse various performance
measurement models and benchmarks
Outline the different measures and
ECF3327/ECF5321 - Lec 10
Objectives Week 10
Portfolio Management
Topic 7
Describe
the managed funds industry
and the types of managed funds
and the types of managed funds
Identify
common strategies used in
portfolio management
Portfolio Management &
Per
ECF3327/ECF5321 Lec 9
4/09/2012
Objectives Week 9
Explain
the different types of
forecasts for economic and
companycompany-specific financial
variables
variables
Topic 6
Bonds & Security Anal sis
ly
Describe
the macroeconomic and
industry factors that i
ECF3327/ECF5321 - Lec 8
4/09/2012
Objectives Week 8
Value
coupon-paying bonds and
couponunderstand the relationship between
duration, convexity and bond price
changes
Topic 6
Bonds & Security Anal sis
ly
Apply
the present value model to
equity valuation
ECF3327/ECF5321 - Lec 7
Asset
Asset Pricing Theory
Asset pricing theories
The
Assumptions:
story thus far
Investors
are rational mean-variance
meanoptimisers and price takers
MPT,
CAPM
Single Factor (Index) Model
Alternative form of CAPM
form of CAPM
ECF3327/ECF5321 - Lec 6
23/8/2012
Portfolio to asset pricing
Portfolio
Portfolio & Asset Pricing
Theories
Dont put all your eggs in one basket
Morkowitz
(1952) Portfolio Selection
Tobin (1958)
Sharpe (1963)
Separation Theorem
Single Index Model
Trey
ECF3327/ECF5321 - Lec 5
16/8/2012
Factor Models
Topic 4 Factor Models
Understand the characteristic line and the
the characteristic line and the
inputs required to use the index model
Contrast the portfolio risk calculation of
Markowitz and that in the Si
ECF3327/ECF5321 - Lec 4
Objectives
Construct the
minimum variance set
(MVS) and determine the minimum
variance portfolio (MVP) and efficient
frontier
frontier (EF)
Modern Portfolio Theory
Assess
the impact of short-sales constraint
shorton the MVS and E
ECF3327/ECF5321 - Lec 3
Objectives Week 3 & 4
Demonstrate
how investor preferences can be
modelled and analysed using the utility model
Apply the concept of risk aversion and utility
in capital allocation
Calculate the risk, return and minimum
variance
ECF3327 /ECF5321 - Lec 2
Objectives
Domestic & International
Investments
Be aware of historical risk/return data on
different types of financial assets
Understand the mechanics, risk and
calculations in both margin and short trading
Describe the basic ope
ECF3327/ECF5321 - Lec 1
7/27/2012
Introduction
ECF3327 Investment Finance III
ECF5321 Investment Theory and
Practice
Practice
What
is the nature of investment?
Allocate wealth among assets to increase
returns
Individuals have to make choices
between
Le
ACCT5001 S2 2012 Solutions to Weeks 1 to 5 Review Questions
PSA2.5*, E 3.3*, PSA3.7*, and PSA4.10*
*optional
PROBLEM SET A 2.5
Liu Advertising Pty Ltd
(a)
Date
Apr.
Account Titles and Explanation
1
Cash
Share Capital
(Issued shares for cash)
Post
Ref
Debi
ACCT5001 S2 2012
Self-Study Solutions
Week 11
Ch.10: Q1, Q4, Q5, Q7, Q10, E10.9, PSA10.9, PSA10.10, PSB10.9, BBS10.5
1.
(a) Separate legal existence. A company is separate and distinct from its owners
and it acts in its own name rather than in the name if
ACCT5001 S2 2012
Self-Study Solutions
Week 8
Ch.7: Q7, Q8, E7.3, PSA7.2, PSA7.4, PSA7.5, PSA7.6, & PSA7.7
7.
Accounts receivables are amounts owed by customers on account. They result from
the sale of goods and services in the normal course of business op
ACCT5001 S2 2012
Self-Study Solutions
Week 7
Ch.6: Q3, Q5, E6.5, E6.11, PSA6.4, PSA6.8
3.
A subsidiary ledger is a group of accounts with a common characteristic. The
accounts are assembled to facilitate the accounting process by freeing the
general ledge
ACCT5001 S2 2012
Self-Study Solutions
Week 6
Ch.5: Q4, Q8, BE5.4, E5.1, PSA5.1, PSA5.3, PSA5.5, PSA5.6
4.
The primary basis of accounting for inventories is cost in accordance with the cost
principle. The major objective for inventories is the proper dete
ACCT5001 S2 2012
Self-Study Solutions
Week 4
Week 4 Self Study Questions:
Chapter 3: Q1, 5, 10, E3.5, E3.12; E3.13*; PSA3.3; PSB3.3, 3.4; BBS3.5*
*optional
1.
Under the accounting period concept, an accountant is required to determine
the impact of each a
ACCT5001S22011
SelfStudySolutions
Week3
Week 3 Self Study Questions:
Chapter 2 Q1, 5, 8: E2.6; E2.7; E2.8: PSA2.2; PSA2.4; PSA2.7; PSA2.10; PSB2.5*
*optional
1.
The system of collecting and processing transactions or data and communicating
financial infor