Estimating the Length of the Excess Earnings Period
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This paper presents several approaches to the problem of measuring the length of the excess earnings period. Each of these models is based upon the assumption that the return on equity must inevitably decline over time and return to the opportunity cost of capital. One of these models is a simplified partial retention model that approximates the standard dividend discount model. We demonstrate that this simplified model is capable of producing a robust approximation of the standard dividend discount model, while facilitating a much simpler 3‐stage pricing model. Further, we provide evidence that the excess earnings period is relatively short, even when we consider the market power of the Dow Thirty and even when we restrict all post‐horizon returns to the opportunity cost of equity.
Abstract
This paper presents several approaches to the problem of measuring the length of the excess earnings period. Each of these models is based upon the assumption that the return on equity must inevitably decline over time and return to the opportunity cost of capital. One of these models is a simplified partial retention model that approximates the standard dividend discount model. We demonstrate that this simplified model is capable of producing a robust approximation of the standard dividend discount model, while facilitating a much simpler 3‐stage pricing model. Further, we provide evidence that the excess earnings period is relatively short, even when we consider the market power of the Dow Thirty and even when we restrict all post‐horizon returns to the opportunity cost of equity.
참고문헌 (10)
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