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As you've said, you can apply a version of the DDM, namely the gordon growth model -- assuming a constant growth of dividends. GGM = D1 / (r-g) So you need the cost of equity, the future dividends, and a growth rate. In your case, the required return on equity is basically the cost of equity -- it's just another word for it. Required return on equity is the ...


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Intro: Duration-Based Asset Pricing Similar to bonds, we can define the duration of a stock as $$ Dur_{i,t} = \sum_{s=1}^\infty s\cdot\frac{\mathbb{E}_t[CF_{i,t+1}]e^{-s r_{i,t}}}{P_{i,t}},$$ where $P_{i,t}$ is today's stock price, $r_{i,t}$ a discount rate and $CF_{i,t}$ are cash flows. That variable tells you the weighted average of when a firm receives ...


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The term structure of returns refers to returns on assets with the same underlying cash flows, where the return is measured over the same holding period, but for different maturities. The price of a stock or equity index $S_t$ is given by the discounted value of its dividends $D_t$: $$P_t = \sum^\infty_{n=1} E_t(M_{t:t+n}D_{t+n}) = \sum^T_{n=1} E_t(M_{t:t+n}...


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