Forecasting Asset Class Returns (2025 Level III CFA® Exam – Reading 2)

Master Forecasting Asset Class Returns for the 2025 CFA® Level III exam. In this lesson, Prof. James Forjan, PhD, CFA, covers fixed-income, equity, real estate, and FX return forecasting using DCF and building-block methods, equilibrium models, the Grinold-Kroner and ST models, EM risk, cap rates, exchange-rate drivers (PPP, UIP), factor models, variance-covariance and ARCH, and business-cycle tilts so you can build disciplined capital-market expectations for the IPS.

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Topic 1 – Capital Market Expectations
Reading 2 – Forecasting Asset Class Returns
LOS : Discuss approaches to setting expectations for fixed-income returns.
LOS : Discuss risks faced by investors in emerging market fixed-income securities and the country risk analysis techniques used to evaluate emerging market economies.
LOS : Discuss approaches to setting expectations for equity investment market returns.
LOS : Discuss risks faced by investors in emerging market equity securities.
LOS : Explain how economic and competitive factors can affect expectations for real estate investment markets and sector returns.
LOS : Discuss major approaches to forecasting exchange rates.
LOS : Discuss methods of forecasting volatility.
LOS : Recommend and justify changes in the component weights of a global investment portfolio based on trends and expected changes in macroeconomic factors.

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