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Valuation of equity capital markets using FED model
[Ocenění akcií v průběhu finanční krize pohledem FED modelu]

Author

Listed:
  • Jiří Korbel
  • Petr Blaheta

Abstract

The paper deals with problems related to valuation of equity capital markets using a well known FED model. Although the model has a relatively good explanatory power on historical data starting from 1979 to 2002, the recent development during the last financial crisis which started in 2007 and finished in 2009 resulted in significant deterioration of the models' usefulness for forecasting. We also outline selected specifications of the FED model and analyze its behavior during the financial crisis. We conclude that the reason for decrease in explanatory power stems from the change in economic fundamentals. The paper also explores theoretical drawbacks of the FED model.

Suggested Citation

  • Jiří Korbel & Petr Blaheta, 2011. "Valuation of equity capital markets using FED model [Ocenění akcií v průběhu finanční krize pohledem FED modelu]," Český finanční a účetní časopis, Prague University of Economics and Business, vol. 2011(1), pages 68-80.
    • Handle: RePEc:prg:jnlcfu:v:2011:y:2011:i:1:id:98:p:68-80
    DOI: 10.18267/j.cfuc.98
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    References listed on IDEAS

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    1. Boudoukh, Jacob & Richardson, Matthew, 1993. "Stock Returns and Inflation: A Long-Horizon Perspective," American Economic Review, American Economic Association, vol. 83(5), pages 1346-1355, December.
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    More about this item

    Keywords

    FED model; Financial crisis; Valuation; Finanční krize; Ocenění;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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