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arXiv · 1605.02472

Generalized semi-Markovian dividend discount model: risk and return

Guglielmo D'Amico
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Abstract

The article presents a general discrete time dividend valuation model when the dividend growth rate is a general continuous variable. The main assumption is that the dividend growth rate follows a discrete time semi-Markov chain with measurable space. The paper furnishes sufficient conditions that assure finiteness of fundamental prices and risks and new equations that describe the first and second order price-dividend ratios. Approximation methods to solve equations are provided and some new results for semi-Markov reward processes with Borel state space are established. The paper generalizes previous contributions dealing with pricing firms on the basis of fundamentals.

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BibTeXRIS

Guglielmo D'Amico. 2016-05-09. Generalized semi-Markovian dividend discount model: risk and return. https://arxiv.org/abs/1605.02472

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