Posts Tagged ‘valuation’

The Arbitrage Pricing Theory is a method used to estimate the returns on assets and portfolios. It is a model based on the linear relationship between an asset’s expected risk and return.

The Modigliani-Miller Theorem suggests that a company’s capital structure and the average cost of capital does not have an impact on its overall value.

The Gordon growth model, or GGM, is used to calculate the intrinsic value of a stock from future dividends. The model only works for companies that pay out dividends, which have a constant growth rate.

Modern Portfolio Theory is a theory presented in 1952 by Harry Markowitz on how risk-averse investors can create portfolios to maximize the return on investments based on the optimal levels of risk.

Stock valuation is the process of determining the current (or projected) worth of a stock at a given time period. There are 2 main ways to value stocks: absolute and relative valuation.