N
Nicholas.Campbell
Member
Hello,
Could somebody PLEASE help me out on this one...
I just don't get the equation for the expected return for equities:
E[return] = initial income yield + expected capital gain
= initial income yield + (impact of change in yield + income growth)
= (initial income yield + impact of change in yield) + income growth
= dividend yield + income growth
= d + g
Questions
=========
q1) What is the difference because the initial income yield and the dividend yield? I thought the initial income yield was the dividend yield when purchased, so at what point in time is the dividend yield term referring to?
q2) Could someone please give me a working example of this, or better still a proof?
I understand the heuristic argument that the expected capital gain (or price) will be due to yield changes and income growth, but I can't work out the maths behind this!
I have literally wasted hours on this because I cannot move on until I fully understand something!
Thanks,
Nick
Could somebody PLEASE help me out on this one...
I just don't get the equation for the expected return for equities:
E[return] = initial income yield + expected capital gain
= initial income yield + (impact of change in yield + income growth)
= (initial income yield + impact of change in yield) + income growth
= dividend yield + income growth
= d + g
Questions
=========
q1) What is the difference because the initial income yield and the dividend yield? I thought the initial income yield was the dividend yield when purchased, so at what point in time is the dividend yield term referring to?
q2) Could someone please give me a working example of this, or better still a proof?
I understand the heuristic argument that the expected capital gain (or price) will be due to yield changes and income growth, but I can't work out the maths behind this!
I have literally wasted hours on this because I cannot move on until I fully understand something!
Thanks,
Nick