This may already have been pointed out by others in AF: For Grinold Kroner: Guideline answers to q in 2007 exam clarify the term percent change in shares outstanding ( I got it wrong) Delta S is the expected percent change in shares outstanding (the negative of the repurchase yield ) So if they mention repurchase yield to be 1% , then - Delta S is 1%. Completely counterintuitive to me , but makes sense now: Dividends Reduce capital, and hence the opportunities to earn higher returns per share. Having +ve Repurchase yield means company buying back shares , so it is a net increase of earnings per share , i.e. more returns per share.
this is nasty, just nasty. this made me walk out of the room and throw my arms up in disgust when i read the answer. i bet 90% of testtakers got this wrong.
And sneaky CFA kept the inflation rate in a different table in another part of the question ( way above in the PDF ). So I was doing all kinds of calculations using the GIM and Correlations and Sharpe to try and get a Risk Free Rate . Lol . Stupid me, but I bet at least a few would have been searching up and down like me on that fateful day in June, 2007
if repurchase yield is positive that is a good thing (fewer shares outstanding) so the E® should increase, thus it is added to the E® if it is negative, that is a bad thing, so the E® will be lower
Higher dividend = Higher return ( dividend yield income ) Higher Share Repurchases = Higher return ( Repurchase yield income ) Higher P/E = Higher ( Market confirmation by paying higher P for same E ) Higher inflation = Higher ( Company able to pass on inflation effects and grow) Higher growth = Higher Return ( growing company)
janakisri Wrote: ------------------------------------------------------- > Higher dividend = Higher > return ( dividend yield income ) > Higher Share Repurchases = Higher return ( > Repurchase yield income ) > Higher P/E = Higher ( > Market confirmation by paying higher P for same E > ) > Higher inflation = Higher ( > Company able to pass on inflation effects and > grow) > Higher growth = Higher Return > ( growing company) All applicable only under the ceteris paribus assumption. For instance, higher dividend return will most likely result in a decrease in g, etc…
ceteris peribus kid, I got it.
GIPS doesn’t apply to the exams. – this is still longer wake2000’s post.
i am changing my PS3 login name to Ceter1s Per1bus