THE "FUNDAMENTAL" DETERMINANTS

OF

STOCK PRICES


As a popular rhyme on Wall Street goes:

A cow for her milk,
A hen for her eggs,
And stock, by heck,
For her dividends.


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Determinant 1: The expected dividend growth rate.
Determinant 2: The expected dividend payout.
Determinant 3. The degree of risk.
Determinant 4. The level of market interest rates.

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Source: Burton Malkiel, "A Random Walk Down Wall Street", 1997.