REVISITING "DIVIDEND YIELD PLUS GROWTH" AND ITS APPLICATION
In this paper we extend Thompson's [17] work using time series models within the discounted cash flow framework to estimate the cost of equity capita] for a firm. In particular we do the following: First, we prove the existence and uniqueness of a solution for the cost of equity capital. Second...
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Published in | The Engineering economist Vol. 41; no. 2; pp. 123 - 147 |
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Main Authors | , |
Format | Journal Article |
Language | English |
Published |
Norcross
Taylor & Francis Group
1996
Taylor & Francis Inc |
Subjects | |
Online Access | Get full text |
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Summary: | In this paper we extend Thompson's [17] work using time series models within the discounted cash flow framework to estimate the cost of equity capita] for a firm. In particular we do the following: First, we prove the existence and uniqueness of a solution for the cost of equity capital. Secondly, we verify that the cost of equity function is continuously differentiable and derive the formula for its reliability. Formulas for both the cost and its reliability are in terms of infinite sums or infinite dimension matrices. Thirdly, we derive estimators of the cost of equity capital and its reliability which are in terms of finite sums and easy to calculate. We show that these estimated converge to the cost of equity capital and its reliability. Finally, our procedure for estimation applies to a wide variety of time series models that may be used to forecast dividends. |
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Bibliography: | ObjectType-Article-2 SourceType-Scholarly Journals-1 ObjectType-Feature-1 content type line 23 |
ISSN: | 0013-791X 1547-2701 |
DOI: | 10.1080/00137919608967482 |