A note on the computation of the equity premium and the market value of firm equity

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.

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Year of publication:	2010
Authors:	Heer, Burkhard ; Maußner, Alfred
Publisher:	Munich : Center for Economic Studies and ifo Institute (CESifo)
Subject:	Unternehmensbewertung \| Risikoprämie \| Betriebsvermögen \| Einnahmen \| Discounted Cash Flow \| Theorie \| asset prices \| firm value \| equity premium

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Series:	CESifo Working Paper ; 3042
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	626802946 [GVK] hdl:10419/38944 [Handle]
Classification:	G12 - Asset Pricing ; C63 - Computational Techniques ; E22 - Capital; Investment (including Inventories); Capacity ; E32 - Business Fluctuations; Cycles
Source:	EconStor

Persistent link: https://www.econbiz.de/10010275839