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- 2011-7-11
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2#
发表于 2011-7-11 19:11
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If a stock is overvalued in relation to a particular model, the stock will generate a return below it's required rate of return and therefore generate negative alpha. Conversely, if the stock is undervalued it should generate positive alpha.
Essentially, you are looking at two models who's assumptions do not match up instead of whether the stock in fact will generate positive or negative alpha.
If the stocks estimated future value at t1 is $23.7 and r = 12%, then the stock is still overvalued at $21.4. It will plot above the security market line which tells us it should $23.7/1.12 = $21.16.
However, your DCF model does not tie with the model which is estimating r = 12% (is this CAPM?). If the they tied in, and we assume the DCF model is specified correctly, you could say that r should in fact = 9.2%. Therefore, either one of the components of CAPM must be wrong 9.2% = R(f) + B(R(m) - R(f)).
Conversely, if we assume that the CAPM is correct and r = 12%, then a component of the DCF model is incorrect (D1/1+.12)+(DN/1+.12^N)+Terminal Value. |
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