Journal article 559 views 132 downloads
Discounting earnings with stochastic discount rates
Marco Realdon
The European Journal of Finance, Volume: 25, Issue: 10, Pages: 910 - 936
Swansea University Author: Marco Realdon
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DOI (Published version): 10.1080/1351847x.2018.1548368
Abstract
This paper presents new equity valuation formulae in closed form that extend the abnormal earnings growth (AEG) valuation of Ohlson andJuettner-Nauroth (2005) to the cases of stochastic cost of capital or stochastic interest rates. Interest rates are modeled by quadraticterm structure models. Valuat...
| Published in: | The European Journal of Finance |
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| ISSN: | 1351-847X 1466-4364 |
| Published: |
Taylor & Francis (Routledge)
2019
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| Online Access: |
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| URI: | https://cronfa.swan.ac.uk/Record/cronfa45490 |
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| Abstract: |
This paper presents new equity valuation formulae in closed form that extend the abnormal earnings growth (AEG) valuation of Ohlson andJuettner-Nauroth (2005) to the cases of stochastic cost of capital or stochastic interest rates. Interest rates are modeled by quadraticterm structure models. Valuation can be very sensitive to the correlation between the factors driving earnings and interest rates. |
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| Keywords: |
abnormal earnings growth valuation, discounted dividends valuation, risk-neutral valuation, discrete time quadratic term structure models. |
| College: |
Faculty of Humanities and Social Sciences |
| Issue: |
10 |
| Start Page: |
910 |
| End Page: |
936 |