Abstract
We relate valuation multiples to fundamentals through a new framework. Starting with a standard Gordon dividend discount model and applying a Dupont decomposition, we investigate how changes in fundamentals affect pricing in the cross section of global equities. We find that changes in fundamentals affect value and growth companies in a different way; growth companies are more sensitive to net profit margins and growth expectations. Finally, we quantify the effect fundamentals might have in the style rotation from growth to value across different industry groups, given the challenges value investors have been faced with in the most recent past.
Full Text 
Sign-in/Register to access full text options
Sign-in/Register to access full text options 
Published version (
Free)
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
