NO.PZ202212280100002702
问题如下：
The risk- free rate is 2.0%, and the global market risk premium is 5.5%. Contrast, using the information provided above, the results of a reverse optimization approach with that of the MVO approach for each of the following:
ii. The values
of the expected returns for US equities and global bonds.
Justify
your response.
选项：
解释：
ii. The values
of the expected returns for US equities and global bonds
•
For the reverse optimization
approach, the expected returns of asset classes are the outputs of optimization
with the market capitalization weights, covariances, and the risk aversion
coefficient used as inputs.
•
In contrast, for the MVO
approach, the expected returns of asset classes are inputs to the optimization,
with the expected returns generally estimated using historical data.
•
The computed values for the
expected returns for global bonds and US equities using the reverse
optimization method are 5.3% and 9.7%, respectively.
•
In contrast, the expected
return estimates used in the MVO approach from Exhibit 1 for global bonds
and US equities are 4.7% and 8.6%, respectively.
The output of
the reverse optimization method are optimized returns which are viewed as
unobserved equilibrium or imputed returns. The equilibrium returns are
essentially long- run capital market returns provided by each asset class and
are strongly linked to CAPM. In contrast, the expected returns in the MVO
approach are generally forecasted based on historical data and are used as
inputs along with covariances and the risk aversion coefficient in the
optimization. The reverse- optimized returns are calculated using a CAPM
approach. The return on an asset class using the CAPM approach is calculated as
follows:
Return on
Asset Class = Risk- Free Rate + (Beta) (Market Risk Premium)
Therefore, the
implied returns for global bonds and US equities are calculated as follows:
Return on
Global Bonds = 2.0% + (0.6) (5.5%) = 5.3%
Return on US
Equities = 2.0% + (1.4) (5.5%) = 9.7%
The implied
equilibrium returns for global bonds and US equities are 5.3% and 9.7%,
respectively. These implied returns are above the forecasted returns based on
historical data (from Exhibit 1) used as inputs in the MVO approach for
global bonds and US equities of 4.7% and 8.6%, respectively.
如题
