J hawkins a forward ggm econ 136 financial economics

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Unformatted text preview: ￿￿ ￿￿ ￿￿ ￿￿ ￿￿ ￿ A spot GGM A forward GGM high growth phase A forward GGM stable growth state ￿ ￿￿ ￿￿ ￿￿ ￿ D0 (1 + gh ) DT (1 + gh ) DT (1 + gs ) = − + ( r h − gh ) (1 + rh )T (rh − gh ) (1 + rh )T (rs − gs ) ￿ ￿￿ ￿￿ ￿￿ ￿￿ ￿￿ ￿ A spot GGM A forward GGM Equities I: R. J. Hawkins A forward GGM Econ 136: Financial Economics 14/ 20 The Two-Stage Dividend Discount Model A Portfolio of Gordon Growth Models (GGMs) Now DT = D0 (1 + gh )T PRs PRh , so: high growth phase stable growth state ￿ ￿￿ ￿￿ ￿￿ ￿ D0 (1 + gh ) DT (1 + gh ) DT (1 + gs ) V0 = − + (rh − gh ) (1 + rh )T (rh − gh ) (1 + rh )T (rs − gs ) ￿ ￿￿ ￿￿ ￿￿ ￿￿ ￿￿ ￿ A spot GGM A forward GGM A forward GGM stable growth state high growth phase ￿￿ ￿ ￿ ￿￿ ￿￿ T PRs T D0 (1 + gh ) D0 (1 + gh ) (1 + gh ) D0 (1 + gh ) PRh (1 + gs ) = − + (rh − gh ) (1 + rh )T (rh − gh ) (1 + rh )T (rs − gs ) ￿ ￿￿ ￿￿ ￿￿ ￿￿ ￿￿ ￿ A spot GGM V0 = ￿ A forward GGM...
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This note was uploaded on 01/23/2014 for the course ECON 136 taught by Professor Szeidl during the Fall '08 term at University of California, Berkeley.

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