Income return in Grinold-Kroner model

CFA Level III
#21

the value of the expected income return = d1/p0 - (Change in shares outstanding).

if they say repurchase yield = (anything positive here), this is a negative value as shares outstanding declines.

you would have a div yield of 4% - (-2% change) or a 6% value. only if shares outstanding grow will your income value decline.

Don’t forget that the expected earnings growth is a nominal value as well and you need to add the inflation figure to it.

this calculation will take out several people, maybe even myself.

#22

the value of the earnings growth is real thats why you still have to add the inflation figure

#23

got you. yes, i meant that line item, expected earnings is nominal. the earnings growth is real + the value of inflation. thanks.

#24

I fixed my thinking.