Yardeni Model factors

CFA Level III
#1

there are 2 factors that Yardeni has that Fed doesnt…equity risk premium and earnings growth rate

the risk premium is not accurate because its more of a credit risk premium than total risk premium

my confusion lies in the earnings growth rate…schweser says that the LTEG rate might not be accruate representation of earnings growth but CFAI (2011 real exam answers) says that Yardeni accurately addresses the earnings growth…

what am i missing?

thanks

#2

which question on 2011 AM or PM?

isn’t it the multiplier (d) that is subjective and could be inaccurate? not necessarily the LTEG itself.

#3

AM

#4

I guess the LTEG assembled by Reuters is the accepted Earnings Growth projection. I don’t know if any growth projection can be accurate. The word accurate itself implies the analysts have some sort of crystal ball , They certainy don’t and in fact most of them have some sort of bias. Its just a badly framed question , and would be better they drop the word accurate. But certainly the Fed model has no Equity growth premium component at all.

#5

i think schweser is right, because from what i remember about Dr. Yardeni’s website (when he used to publish this stuff back in his deutsche bank days on www.yardeni.com) is that it was based on the 5 year forward IBES (now thomson reuters) consensus growth estimates for S&P500 earnings.

and that isn’t necessarily accurate. it’s an estimate like any estimate, which can be wrong.

#6

http://www.yardeni.com/Pub/style.pdf

see page 8 at the bottom. i am right. cfai is wrong.

#7

thanks guys, but will follow CFAI for exam =]