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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/27482
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| Title: | Accounting-based Valuation and Changing Interest Rates |
| Authors: | Gode, Dan
Ohlson, James |
| Keywords: | Stochastic Interest Rates
Valuation
Ohlson Model
Random Walk Model of Earnings
Permanent Earnings |
| Issue Date: | 29-Jun-2002 |
| Series/Report no.: | Dhananjay (Dan) K. Gode-05 |
| Abstract: | We generalize Ohlson's (1995) model to stochastic interest rates while
making no specific assumptions about the stochastic process of interest
rates. Our analysis of the case when earnings suffice for valuation
yields three insights. (1) In the valuation function, the multiplier for
forthcoming earnings depends on the current rate, but the multiplier for
current earnings depends on the lagged rate. (2) In the residual
earnings dynamic, the persistence of residual earnings increases in the
current rate and decreases in the lagged rate. (3) In the earnings
dynamic, the traditional random walk requires an additional term,
current earnings multiplied by the percentage change in interest rates. |
| URI: | http://hdl.handle.net/2451/27482 |
| Appears in Collections: | Accounting Working Papers
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