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Valuation
#6
(01-30-2016, 08:20 AM)benjamen Wrote: Assumption: people prefer less variance to more variance in their investments
1st Result: Bonds are seen as more stable than stocks, hence the finding that people pay more for bonds
2nd Result: Stocks with lower beta (less variance) are valued higher than stocks with higher beta

Why Kenbob may be seeing the total stock price being related to beta, average market p/e, and individual stock p/e:
Capital Asset pricing model tells us that: 
Expected return of an asset = Risk free rate + beta * (average market rate - Risk free rate)
Translate into dividend stock...
(Div Yield + expect stock appreciation %) = yield of U.S. treasury bond + beta of stock * (average market return - yield of U.S. treasury bond

I think many DGI'ers don't equate beta with risk.  You can't really come up with a number (i.e. 1.5) and say that's the risk.  Beta measures price volatility against a benchmark, say the S&P 500.  Price volatility doesn't equal risk.
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Messages In This Thread
Valuation - by KenBob - 01-28-2016, 12:39 PM
RE: Valuation - by Dividend Watcher - 01-28-2016, 04:56 PM
RE: Valuation - by KenBob - 01-28-2016, 07:25 PM
RE: Valuation - by cannew - 01-29-2016, 02:03 PM
RE: Valuation - by benjamen - 01-30-2016, 08:20 AM
RE: Valuation - by DividendGarden - 02-04-2016, 09:02 AM
RE: Valuation - by NilesMike - 10-08-2016, 03:11 PM
RE: Valuation - by Dividend Watcher - 10-09-2016, 11:34 AM
RE: Valuation - by DividendGarden - 10-10-2016, 09:59 AM



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