# Re: grinold kroner model

can anyone explain to me the components of the Grinold kroner formula… E= D/P - %chng in S + i + g +%chng in PE y do we take % chng in S ? how would u derive g? wat is meant by % change in PE?

All of this is in the curriculum. why don’t you look it up? %change S is the change in shares outstanding g can be derived either Nom GDP or Real GDP + Inflation change in PE is the price multiple

iamsuperman

iteracom Wrote: ------------------------------------------------------- > All of this is in the curriculum. why don’t you > look it up? > > %change S is the change in shares outstanding > > g can be derived either Nom GDP or Real GDP + > Inflation > > change in PE is the price multiple since i (inflation) is present in the equation above …- it has to be nominal GDP growth.

My bad – nominal gdp growth = real gdp growth + inflation. since i=inflation term in the equation - g has to be real gdp growth.

Im not your superwoman, im not the kind of girl that you let down and think that everythings ok.

There’s something I never figured out - how does Superman have sex? Wouldn’t he destroy any human with the power of his involuntary er… spasms?

ohai Wrote: ------------------------------------------------------- > There’s something I never figured out - how does > Superman have sex? Wouldn’t he destroy any human > with the power of his involuntary er… spasms? He’s strong but gentle.

Know this formula by heart - it comes on the exam every year. It was on last year anyways.

ohai Wrote: ------------------------------------------------------- > There’s something I never figured out - how does Superman have sex? Wouldn’t he destroy any human with the power of his involuntary er… spasms? He’s an alien, for Christ sake. His Kyrptonian biological makeup is enhanced by earth’s yellow sun. If Lois gets a tan the kid could kick right through her stomach. Only someone like Wonder Woman has a strong enough uterus to carry his kid. The only way he could bang regular chicks is with a kryptonite condom. That would kill him.

wrong way…guys… our hero has a problem here!

iteracom Wrote: ------------------------------------------------------- > All of this is in the curriculum. why don’t you > look it up? > > %change S is the change in shares outstanding > > g can be derived either Nom GDP or Real GDP + > Inflation > > change in PE is the price multiple i did look it up. what i mean to ask is why change in PE has a positive relationship with E® ? can u help explain that?

^ that’s a pretty obvious reason… im surprised someone who passed L2 wouldn’t understand it right away. In any case, if the earnings don’t change, but the market is willing to pay a higher multiple, your position becomes more valuable, which increases your return.

positive return between p/e and expected returns. p/e increases - for same level of earnings - your p would go up. (which is an expectation of higher returns).

iteracom Wrote: ------------------------------------------------------- > ^ that’s a pretty obvious reason… im surprised > someone who passed L2 wouldn’t understand it right > away. > > In any case, if the earnings don’t change, but the > market is willing to pay a higher multiple, your > position becomes more valuable, which increases > your return. i understand the difference between high and low PE. i was just not sure how a high PE is an indicator of greater expected returns. On the contrary, according to value buying, one of the most important criteria of stock selection is buying the stocks with low PE ratio. i think i was reading too much into the text. on another note, u can try to be more civil when u answer someone’s query .

cpk123 Wrote: ------------------------------------------------------- > positive return between p/e and expected returns. > p/e increases - for same level of earnings - your > p would go up. (which is an expectation of higher > returns). yeah thanks. i knew that of course. i was kind of confusing with another concept. never mind, got it figured now.

I was very civil. First to answer your question and your follow-up. But if it’s too much for you, then I’ll just let california pizza kitchen answer from now on.