The Samp;P 500 Index is valued using the discounted dividend model. The model, however, must be corrected for the use of share repurchases. It is found that using the more optimistic, but not unreasonable assumptions, the Samp;P 500 is not overvalued. The index may therefore reflect underlying...

The discounted dividend model is the most widely recognized share valuation model. The model, as customarily presented and applied, however, will undervalue corporations that use share repurchases in addition to dividends to return cash to investors. Because many corporations now regularly...

We examine the returns of gold mining stocks, gold, and a diversified portfolio of U.S. stocks over a period from 2006 to 2015. We find that the return on gold mining stocks is explained more by the return on gold than by the return on stocks. Because gold mining stocks are more like gold than...

There is an increasing interest in the economic and financial knowledge of the public. Former Federal Reserve Chairmen Greenspan and Bernanke often stressed the importance of improved economic and financial knowledge of the general public. Using recent survey results from the 2012 National...

COVID‐19 was a shock to financial markets. On March 23, 2020 the S&P 500 index had fallen by over 31% from its closing value on the first trading day of the year and the NASDAQ index fell nearly 25%. Volatility increased. The CBOE VIX Index and trading volume spiked in March and remained...

We examine the relationship between investment and saving for a cross section of European countries before and during the euro crisis. Investment is positively and significantly related to saving, and this relationship is stronger during the euro crisis period. This increase is a departure from...

Estimation of a corporation's cost of equity is crucial for various financial analyses. One area in which it is necessary is in rate of return regulation. In order for the regulator to set an appropriate rate of return, the corporation's cost of equity must be estimated accurately. This article...

Over the years, many stocks in emerging industries, with hindsight, have been overvalued. Stock prices relative to revenue, earnings, book values, or other measures often do not seem consistent with fundamental value. I illustrate a model in which the overvaluation of stocks is not necessarily...

The equity risk premium (ERP) is used to estimate a firm's cost of equity and overall cost of capital. It therefore is relevant to, for example, capital budgeting analyses and calculation of economic value added. Unfortunately, current estimates of the ERP range widely. Some claim it has fallen...

The standard discounted dividend model provides flawed estimates of the cost of equity when corporations repurchase shares, which many now do. A simulation model shows that the discounted dividend model, as customarily applied, will lead to cost of equity estimates that are too low. A corrected...