Pascal PIERRE edited section_textit_DDM_textit_RIM__.tex  about 6 years ago

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\begin{equation}  P_{t}=\displaystyle\sum_{i=1}^{\infty}\frac{D_{t+i}}{(1+R)^i}\approx\frac{D_{t+1}}{R-g}  \end{equation}  where $g$ is the expected constant dividend growth rate to perpetuity.This perpetuity.If we isolate future returns $R$, we get:  \begin{equation}  R=frac{D_{t+1}}{P_{t}}+g  \end{equation}  This  equation highlights the fact that future returns are driven by the current valuation and future growth. \\  \\  Although the \textit{DDM} is theoretically correct, it carries some well known caveats. One in