A Generalized Earnings‐Based Stock Valuation Model with Learning. Issue 2 (May 2017)
- Record Type:
- Journal Article
- Title:
- A Generalized Earnings‐Based Stock Valuation Model with Learning. Issue 2 (May 2017)
- Main Title:
- A Generalized Earnings‐Based Stock Valuation Model with Learning
- Authors:
- Jacoby, Gady
Paseka, Alexander
Wang, Yan - Abstract:
- Abstract: We present a stock valuation model in an incomplete‐information environment in which the unobservable mean of earnings growth rate (MEGR) is learned and price is updated continuously. We calibrate our model to a market portfolio to empirically evaluate its performance. Of the 8.84% total risk premium we estimate, the earnings growth premium is 4.57%, the short‐rate risk contributes 3.38%, and the learning‐induced risk premium on the unknown MEGR is 0.89% (a nontrivial 10% of the total risk premium). This result highlights the significant learning effect on valuation, implying an additional risk premium in an incomplete‐information environment.
- Is Part Of:
- Financial review. Volume 52:Issue 2(2017)
- Journal:
- Financial review
- Issue:
- Volume 52:Issue 2(2017)
- Issue Display:
- Volume 52, Issue 2 (2017)
- Year:
- 2017
- Volume:
- 52
- Issue:
- 2
- Issue Sort Value:
- 2017-0052-0002-0000
- Page Start:
- 199
- Page End:
- 232
- Publication Date:
- 2017-05
- Subjects:
- asset pricing -- incomplete information -- filtering -- equity risk premium -- G12 -- G14
Finance -- United States -- Periodicals
Finance -- Periodicals
332 - Journal URLs:
- http://www.blackwellpublishing.com/journal.asp?ref=0732-8516 ↗
http://onlinelibrary.wiley.com/ ↗ - DOI:
- 10.1111/fire.12128 ↗
- Languages:
- English
- ISSNs:
- 0732-8516
- Deposit Type:
- Legaldeposit
- View Content:
- Available online (eLD content is only available in our Reading Rooms) ↗
- Physical Locations:
- British Library DSC - 3926.979800
British Library DSC - BLDSS-3PM
British Library HMNTS - ELD Digital store - Ingest File:
- 1346.xml