Valuation in Fundamental Finance

Valuation is the discipline of estimating the value of financial securities, such as stocks an bonds, by fundamental analysis of financial statements.

The Valuation Process

Graham & Dodd and Modern Financial Analysis” by Joseph Calandro, Jr. PwC  & the University of Connecticut. December 13, 2011.

 

Security Analysis, fundamental research

 

The Equity Premium

According to Wikipedia:

“In the equity market the risk premium is the expected return of a company stock, a group of company stocks, or a portfolio of all stock market company stocks, minus the risk-free rate. The return from equity is the sum of the dividend yield and capital gains. The risk premium for equities is also called the equity premium. Note that this is an unobservable quantity since no one knows for sure what the expected rate of return on equities is. Nonetheless, most people believe that there is a risk premium built into equities, and this is what encourages investors to place at least some of their money in equities.”
– Read the complete article

 

Table: 27-year run of earnings yield/risk free yield in the U.S.

List of Articles on the equity risk premium

Professor Damodaran on Valuation

Famous Security Valuation Write-Ups

  • Schroeder A. & Lapin G. (1999). Berkshire Hathaway. The Ultimate Conglomerate Discount. PaineWebber. (link)
  • Buffett W.  (1951).  The Security I Like Best (link)

Academic Research on Valuation

Read More on Valuation

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