Perfectly priced stock
If (hypothetically), a stock is perfectly priced (and creating shareholder value), is your expected return simply the discount rate?
If (hypothetically), a stock is perfectly priced (and creating shareholder value), is your expected return simply the discount rate?
+4,084 | Bank of America - Juniors Strike to start Monday May 6th | 442 | 24s | |
+857 | BOFA ALREADY TRYING TO COVER UP THEIR TRACKS | 80 | 4s | |
+609 | This is a dark day for Wall Street. | 46 | 18h | |
+483 | BofA Associate Death - WSJ, FT, CNBC, Bloomberg | 51 | 2h | |
Leo Lukenas was his name. Fundraiser for His Family is Here. (Bank of America Associate that passed away) | 11 | 6m | ||
+206 | How to strike without being fired. | 24 | 40m | |
+194 | Analyst at Bofa FIG-Thoughts | 29 | 47m | |
+171 | Big Layoff at Barclays - 5/1/24 | 88 | 1d | |
+167 | Hey WSJ, BBG, CNBC, FT, it's been more than 72 hours that this BofA IBD Associate was reported dead | 23 | 16h | |
+154 | BofA List | 37 | 17h |
Career Resources
Bunp
I believe it should be the cost of equity if you are an equity investor.
I don't think so. If by "discount rate" you are talking about either the cost of equity (Ke) or the rate at which the Fed lends to banks, neither one is a good reflection of an investor's most likely return on a stock "priced to perfection." There's no (to my knowledge) official definition of "priced to perfection" but as a practical matter, it generally means that investors are ignoring all risk to the security. Mathematically that means the Ke calculation, instead of risk free+risk premium*beta, is just risk free x beta, with risk free usually being treasuries. (One could further argue that something priced to perfection is also ignoring beta).
Yes, that is correct.
Your expected return would be the theoretically perfect cost of equity (which we typically use capm to approximate).
Quia consequatur ut id commodi laboriosam quis. Itaque enim consequatur modi nemo. Adipisci dolores incidunt atque rerum quis.
Error voluptatibus sed veniam quasi. Suscipit veniam deleniti repellat accusantium commodi eligendi. Odio id dolor nemo ex modi. Veritatis facilis cupiditate deleniti et explicabo in nam.
A excepturi iste et quos sed excepturi. Aut deleniti autem ut vel fuga maxime dolore. Atque placeat dicta provident occaecati tempora.
Expedita fugiat laboriosam nam ad iure omnis sunt blanditiis. Rem eum architecto soluta sint architecto accusantium. Illum quo aliquam adipisci aut amet. Sit magnam ipsum sequi voluptates laboriosam odio voluptatem repellat. Ut dicta aut maxime odio aliquam fugit.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...