Ibbotsen Chen Equity risk premium
A little help here
For the Ibbotsen Chen model [(1+inflation)x(1+RealGDPGrowth)x(1+Changes in PE)-1] +Yield of Market
Am I subtracting the risk free rate at the end?
Granted, almost all my notes say to do so…. But then I came across notes from my TT’S and CFAI mocks that say not to include it. Now I’m confused.
Which one is right? Is there a situation where I would include it and one where I wont?
Thanks for the help
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