The study reviews equity valuation, and proposes an alternative equity valuation model based on a random process modelling of earnings and equity growth. A Markov process is used to model earnings, standardized as earnings to book value, and book value based on rating category. This assumes a...

The study continues previous work on decomposing rating migration matrices from market prices. It further investigates the matter of the associated optimization problem, in plain form, yielding multiple possible local solutions. The sources of non-linearity and complexity of the optimization...