Abstract
In this article the inability to predict the future growth rates and earnings of growth stocks leads to the high volatility of share prices and difficulty in applying the traditional valuation methods. To demonstrate that the high volatility of share prices can nevertheless be used in building a model that leads to a particular cross-sectional size distribution. The model focuses on both transient and steady-state behavior of the market capitalization of the stock, which in turn is modeled as a birth-death process.
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