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Abstract
The search for formal ways to assess the value of equities dates back to the publication of Graham and Dodd’s Security Analysis in 1934. Since then, investors have explored a wide range of methods for determining the current value of a stock and predicting future returns. Jack Mo of P. Schoenfeld Asset Management and Xiao Qiao of the University of Chicago’s Booth School of Business illustrate how the Campbell–Shiller present-value identity can be applied in the real world. A surprising conclusion from their research is that using a well-known academic construct produces the same results as those sought by value investors.
“This work on the Campbell–Shiller identity offers a compelling example of why academics and practitioners should communicate and collaborate together to develop new models and methods for the investment community as a whole,” Mo urges.
TOPICS: Statistical methods, security analysis and valuation
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UK: 0207 139 1600