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

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 3042

Classification and Topics

• Classification: Wirtschaft ; Asset Pricing; Trading Volume; Bond Interest Rates ; Computational Techniques; Simulation Modeling ; Investment; Capital; Intangible Capital; Capacity ; Business Fluctuations; Cycles
• Subject: asset prices ; firm value ; equity premium ; Unternehmensbewertung ; Risikoprämie ; Betriebsvermögen ; Einnahmen ; Discounted Cash Flow ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Heer, Burkhard ; Maußner, Alfred
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2010

Further information

• Handle: http://hdl.handle.net/10419/38944
• Last update: 10.03.2025, 11:42 AM CET