I want to derive the dividend discount model from the asset pricing formula described in "Efficient Capital Markets: A Review of Theory and Empirical Work" by Eugene Fama 1970. The formula that I am referring to is equation number 1:
What I could do so far is the following:
As you can see I separated the asset price today as a function of future price discounted. The phi represents the information in the market about the price, risk etc. If we are pricing a share, we can consider the future price the sum of all the discounted dividends to today, therefore we can rewrite to the following:
Is this correct? If extra information is needed I will provide. Thank you!