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Normative Stock Price Models

Published online by Cambridge University Press:  19 October 2009

Harold Bierman Jr.  and
Jerome Hass
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Extract

All the stock price models discussed in this paper are based on the assumption that the present value of a share of common stock is equal to the discounted value of all future expected dividends accruing to the stockholder:

where Po : current value of a share of common stock,

Dt: dividend expected to be received at end of period t,

k : investor's discount or time-value rate, and

t : time.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 6 , Issue 4 , September 1971 , pp. 1135 - 1144
Copyright
Copyright © School of Business Administration, University of Washington 1971

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