The Significant Relative Yield (SRY) model uses the average and the standard deviation of the ratio of Bond yields/Equity Earning yield over the last 3 years. Which of the following statement is an incorrect reason to use the last 3 years of data? Equities are considered to be mis-priced against Bonds if Bond yields are lower against Equity earning yields, not just currently but less than 2 standard deviation over the last 3 year. A shorter period may not identify the mis-pricing as 2 standard deviation may be a very low number. Along period over which the average of the ratio of Bond yields over Equity earning yields will not allow for mispricing to be identified since the volatility of the ratio over a longer period will capture the extreme moves of the ratio and smaller mispricings will not be captures as the current ratio will always be between the 2 standard deviations. The 3 year period is not based on any theory. The 3 year period is instead based on the model's ability to identify relative mis-pricing and users of the model will need to try different periods to optimize the period used by the model. Equities and Bonds are natural substitute of each other which means that when equities are mispriced, it will take 3 years to adjust back to fundamental value. This assumes that Bonds will be priced using the term structure of interest rates. Equities are considered to be mis-priced against Bonds if Equity earning yields are higher against Bond yields, not just currently but more than 2 standard deviation over the last 3 year. A shorter period may not identify the mis-pricing as 2 standard deviation may be a very low number. The Significant Relative Yield (SRY) model uses the average and the standard deviation of the ratio of Bond yields/Equity Earning yield over the last 3 years. Which of the following statement is an incorrect reason to use the last 3 years of data? Equities are considered to be mis-priced against Bonds if Bond yields are lower against Equity earning yields, not just currently but less than 2 standard deviation over the last 3 year. A shorter period may not identify the mis-pricing as 2 standard deviation may be a very low number. Along period over which the average of the ratio of Bond yields over Equity earning yields will not allow for mispricing to be identified since the volatility of the ratio over a longer period will capture the extreme moves of the ratio and smaller mispricings will not be captures as the current ratio will always be between the 2 standard deviations. The 3 year period is not based on any theory. The 3 year period is instead based on the model's ability to identify relative mis-pricing and users of the model will need to try different periods to optimize the period used by the model. Equities and Bonds are natural substitute of each other which means that when equities are mispriced, it will take 3 years to adjust back to fundamental value. This assumes that Bonds will be priced using the term structure of interest rates. Equities are considered to be mis-priced against Bonds if Equity earning yields are higher against Bond yields, not just currently but more than 2 standard deviation over the last 3 year. A shorter period may not identify the mis-pricing as 2 standard deviation may be a very low number