Standard equity valuation approaches (i.e., DDM, RIM, and DCF model) are derived under the assumption of ideal conditions, such as infinite payoffs and clean surplus accounting. Because these conditions are hardly ever met, we extend the standard approaches, based on the fundamental principle of...

This paper demonstrates a method to forecast stock price using analyst earnings forecasts as essential signals of firm valuation. The demonstrated method is based on the Residual Income Model (RIM), with adjustment for auto-correlation. Over the past decade, the RIM is widely accepted as a...

We introduce a high-dimensional structural time series model, where co-movement between the components is due to common factors. A two-step estimation strategy is presented, which is based on principal components in differences in a first step and state space methods in a second step. The...