Creating User-Defined Market Assumptions

If you wish to add new asset classes to one of the predefined sets of market assumptions, or wish to modify any of the values associated with a predefined set of market assumptions, you may do so by creating user-defined market assumptions.

Each set of user-defined market assumptions must be based on one of the three predefined sets supplied by Morningstar. The user-defined assumptions will initially be a copy of the predefined assumptions. You may then add asset classes or modify the existing assumption values.

To create new user-defined market assumptions:

From either the Investment Planning or Workspace tab, select the Market Assumptions page.
From the toolbar above the grid, click New. The New Capital Market Assumptions dialog box opens.
Select one of the three predefined sets of assumptions to base the new user-defined set on. Click OK.
In the New/Edit Market Assumptions window, enter a Name for the new set.
On the Expected Returns tab, you may add or delete asset classes or edit any of the existing values.
1. To add a new asset class, click the Add button to open the Add Asset Class dialog box.
2. Click the magnifying glass next to the Asset Class Name box to open the Select Asset Class selection screen.
3. You may either select an existing asset class, or click the New button in the lower left-hand corner of the screen to create a new asset class. All asset classes are stored in the Definition Master.
4. Select the asset class and click OK.
5. If the asset class you selected has an associated benchmark serving as its proxy, default historical values will be calculated and presented to you as defaults. You may either accept the defaults or overwrite the defaults with your own values. Default values are calculated from the monthly historical returns of the proxy index, over the same time period that was used to generate the values for the other asset classes in the same set of market assumptions.
6. The new asset class will appear in the New/Edit Market Assumptions window. Here you may modify any of the assumptions for the new asset class, including correlations.
Click OK to save your changes and return to the Market Assumptions grid.