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Miller Modigliani and Ohlson: A Note on an Old Model in New Clothes

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  • Graham Partington

    (Discipline of Finance, University of Sydney)

Abstract

This note demonstrates that Ohlson's (1991) earnings capitalisation model is not a new model, but rather a special case of an earlier earnings capitalisation model developed by Miller Modigliani (1961). The special case arises from a "np growth" condition, which is inherent in Ohlson's model. Ohlson's model can also be interpreted as a standard price earnings model. The "no growth" condition is an important restriction on generalisation of the model.

Suggested Citation

  • Graham Partington, 1993. "Miller Modigliani and Ohlson: A Note on an Old Model in New Clothes," Working Paper Series 29, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
    • Handle: RePEc:uts:wpaper:29
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    File URL: http://www.finance.uts.edu.au/research/wpapers/wp29.pdf
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    References listed on IDEAS

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    1. Easton, Pd & Harris, Ts, 1991. "Earnings As An Explanatory Variable For Returns," Journal of Accounting Research, Wiley Blackwell, vol. 29(1), pages 19-36.
    2. James A. Ohlson, 1991. "The theory of value and earnings, and an introduction to the Ball†Brown analysis," Contemporary Accounting Research, John Wiley & Sons, vol. 8(1), pages 1-19, September.
    3. Merton H. Miller & Franco Modigliani, 1961. "Dividend Policy, Growth, and the Valuation of Shares," The Journal of Business, University of Chicago Press, vol. 34, pages 411-411.
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