Valuation of equity capital markets using FED model

Ocenění akcií v průběhu finanční krize pohledem FED modelu

Jiří Korbel and Petr Blaheta

Český finanční a účetní časopis, 2011, vol. 2011, issue 1, 68-80

Abstract: The paper deals with problems related to valuation of equity capital markets using a well known FED model. Although the model has a relatively good explanatory power on historical data starting from 1979 to 2002, the recent development during the last financial crisis which started in 2007 and finished in 2009 resulted in significant deterioration of the models' usefulness for forecasting. We also outline selected specifications of the FED model and analyze its behavior during the financial crisis. We conclude that the reason for decrease in explanatory power stems from the change in economic fundamentals. The paper also explores theoretical drawbacks of the FED model.

Keywords: FED model; Financial crisis; Valuation; Finanční krize; Ocenění (search for similar items in EconPapers)
JEL-codes: G11 (search for similar items in EconPapers)
Date: 2011
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DOI: 10.18267/j.cfuc.98

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