Wednesday, October 21, 2009

Reconciliation of residual income and free cash-flow models

I wasn't satisfied with the usual method of showing how the residual income model is equivalent to the free cash-flow or dividend discount model (see Ohlson & Juettner-Naworth, 2005). It is a stretch mathematically. So a few months ago, I decided to make my own method, which is now available online at http://ssrn.com/abstract=1492062. Reading advised to finance students and anyone interested in the theory of equity valuation (others will probably find it boring and useless...).

No comments:

Post a Comment