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From dividend yield to discounted cash flow: a history of UK and US equity valuation techniques

Rutterford, Janette (2004). From dividend yield to discounted cash flow: a history of UK and US equity valuation techniques. Accounting, Business and Financial History, 14(2) pp. 115–149.

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This article explores how, as capital markets developed, equity valuation methods changed. The history of equity valuation is described, from its early origins during the South Sea Bubble, through the new issue boom of the nineteenth century and the stock market booms of the 1920s and 1950s. The moves from dividend yield and asset backing, to earnings yield and then P/E ratios are chronicled. The article compares developments in the UK and the US, in particular the relative slowness of the UK market to adopt US-pioneered techniques such as the P/E ratio, the concept of value versus growth stocks, and using intrinsic value to determine whether shares are cheap or dear. The article concludes with a discussion of the relatively slow introduction of the dividend discount model and of discounted cash flow as equity valuation tools on both sides of the Atlantic.

Item Type: Journal Item
ISSN: 1466-4275
Keywords: history of valuation; dividend yield; P/E ratio; intrinsic value; discounted cash flow
Academic Unit/School: Faculty of Business and Law (FBL) > Business > Department for Accounting and Finance
Faculty of Business and Law (FBL) > Business
Faculty of Business and Law (FBL)
Research Group: Innovation, Knowledge & Development research centre (IKD)
Item ID: 1468
Depositing User: Users 12 not found.
Date Deposited: 20 Jun 2006
Last Modified: 07 Dec 2018 08:49
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