Equity Valuation: More than Thirty Years Later

Equity Valuation: Thirty Years Later

Estimating the Equity Premium

To estimate the equity premium, it is helpful to use finance theory: not the old-fashioned theory that efficient markets imply a constant equity premium, but theory that restricts the time-series behavior of valuation ratios, and that links the cross-section of stock prices to the level of the equity premium. Under plausible conditions, valuation ratios such as the dividend-price ratio should n...

Estimating the Equity Premium

To estimate the equity premium, it is helpful to use finance theory: not the old-fashioned theory that efficient markets imply a constant equity premium, but theory that restricts the time-series behavior of valuation ratios, and that links the cross-section of stock prices to the level of the equity premium. Under plausible conditions, valuation ratios such as the dividend-price ratio should n...

The Increase in Market Capitalization for Different Markets

the world have experienced phenomenal expansion. The aggregated market capitalization of all national equity markets has grown from less than US$1 trillion in 1974 to over US$16 trillion by the end of 1997. Exhibit 1 presents evidence of the increase in market capitalization experienced by both developed and emerging markets. The process of growth in global equity markets is still imperfectly u...

Costly Financing, Optimal Payout Policies and the Valuation of Corporate Debt

We present a cashow based model of corporate debt valuation that incorporates two novel features. First, we allow for the separation and optimal determination of the rm's debt-service and dividend policies; in particular, the rm is allowed to maintain cash reserves to meet future debt obligations. Second, our model admits the possibility that raising resources through issuance of new equity cou...