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Parameter Estimation Methods Of Required Rate Of Return On Stock

Author

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  • BATTULGA GANKHUU

    (Department of Applied Mathematics, National University of Mongolia, Ikh Surguuliin Gudamj, Ulaanbaatar 14201, Mongolia)

Abstract

In this study, we introduce new estimation methods for the required rate of returns on equity of private and public companies using the stochastic dividend discount model (DDM). To estimate the required rate of return on equity, we use the maximum likelihood method, the Bayesian method, and the Kalman filtering. We apply the model to a set of firms from the S&P 500 index using historical dividend and price data over a 32-year period. Overall, the suggested methods can be used to estimate the required rate of returns.

Suggested Citation

  • Battulga Gankhuu, 2023. "Parameter Estimation Methods Of Required Rate Of Return On Stock," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 26(08), pages 1-37, December.
    • Handle: RePEc:wsi:ijtafx:v:26:y:2023:i:08:n:s0219024924500055
    DOI: 10.1142/S0219024924500055
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