Stock duration

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Stock duration of an equity stock is the percentage change in price in response to a 1% change in the long-term return that the stock is priced to deliver.[citation needed]

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[edit] Duration

As per Dividend Discount Model: Formula for the duration of stock is as follows-

 D_{ddm} = \frac{1}{K_e-g}

where

  • Dddm is the duration of stock under the DDM model
  • Ke is the discount rate
  • g is the expected growth rate in perpetuity[citation needed]

[edit] Modified duration

For the stock market as a whole, the modified duration is simply the price/dividend ratio, which for the S&P 500 was about 62 in February 2004.[citation needed]

[edit] See also

[edit] External links

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