Stock valuation in dynamic economies

被引:28
作者
Bakshi, G [1 ]
Chen, ZW
机构
[1] Univ Maryland, Smith Sch Business, Dept Finance, College Pk, MD 20742 USA
[2] Yale Univ, Sch Management, New Haven, CT 06520 USA
关键词
stock valuation; earnings growth; equilibrium price/earnings ratios;
D O I
10.1016/j.finmar.2005.01.001
中图分类号
F8 [财政、金融];
学科分类号
0202 ;
摘要
This article develops and empirically implements a stock valuation model. The model makes three assumptions: (i) dividend equals a fixed fraction of net earnings-per-share plus noise, (ii) the economy's pricing kernel is consistent with the Vasicek term structure of interest rates, and (iii) the expected earnings growth rate follows a mean-reverting stochastic process. The resulting stock valuation formula has three variables as input: net earnings-per-share, expected earnings growth, and interest rate. Using a sample of stocks, our empirical exercise shows that the derived valuation formula produces significantly lower pricing errors than existing models, both in- and out-of-sample. Modeling earnings growth dynamics properly is the most crucial for achieving better performance, while modeling the discounting dynamics properly also makes a significant difference. © 2005 Elsevier B.V. All rights reserved.
引用
收藏
页码:111 / 151
页数:41
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