A Note on the Computation of the Equity Premium and the Market Value of Firm Equity

Burkhard Heer and Alfred Maussner ()

No 3042, CESifo Working Paper Series from CESifo

Abstract: Turnovsky (1995) derives in a continuous-time model of a decentralized economy that the correct specification of the firm’s objective function is to maximize the initial value of its outstanding securities. The firm value is the discounted flow of real earnings. For the discrete-time version of the model, we show that the correct computation of the firm value needs to be modified. Depending on the specific formula employed, different values of the equity premium result.

Keywords: asset prices; firm value; equity premium (search for similar items in EconPapers)
JEL-codes: C63 E22 E32 G12 (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.cesifo.org/DocDL/cesifo1_wp3042.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_3042

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().