Re: Stock Dividend Model

richard.lord@milliman.com
Thu, 9 Apr 1998 12:59:48 -0800

The formulas are actually equivalent, they just use a different definition=20=
of=20=
dividend in the numerator=2E Maggin & Tuttle use "dividends received durin=
g time=20=
period zero", which you can think of as the upcoming year=2E Sholom uses=20=
"current dividend" which you can think of as the dividend level during the=20=
prior year, which he then multiplies by a growth factor; the result is the=20=
same=20=
as M & T, and both formulas are correct=2E

Chapter 7 of D'Arcy and Doherty uses "CF1" in the numerator, which is a bet=
ter=20=
description of cash flow during the first year, =2E

MS:aschwart@mail=2Edoi=2Estate=2Enc=2Eus on 04/09/98 10:22:14 AM
To: studygroup10@lists=2Ecasact=2Eorg @ INTERNET=20=
cc: jdonalds@mail=2Edoi=2Estate=2Enc=2Eus @ INTERNET , drosenzw@mail=2Edo=
i=2Estate=2Enc=2Eus=20=
@ INTERNET , delia@mail=2Edoi=2Estate=2Enc=2Eus @ INTERNET (bcc: Richard=20=
Lord/PASA/M&R)
Subject: Stock Dividend Model=20=

One version of the Gordon Shapiro model is shown on page 5-53 of the
Maginn & Tuttle reading; another version is shown on page 141 of
Feldblum's paper on Asset Liability Matching=2E The versions differ by
the factor 1+G=2E I think the version in the Feldblum paper is correct=2E
Would anyone agree? =20=