Parameter Estimation Methods of Required Rate of Return on Stock

Battulga Gankhuu

Papers from arXiv.org

Abstract: In this study, we introduce new estimation methods for the required rate of return of the stochastic dividend discount model (DDM) and the private company valuation model, which will appear below. To estimate the required rate of return, we use the maximum likelihood method, the Bayesian method, and the Kalman filtering. We apply the model to a set of firms from the S\&P 500 index using historical dividend and price data over a 32--year period. Overall, suggested methods can be used to estimate the required rate of return.

Date: 2022-06, Revised 2022-07
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