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Background Note
| HBS Case Collection
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2001
Technical Note on Expectations
by
Carliss Y. Baldwin
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Abstract
Reviews the mathematics of expectations embedded in a company's current stock price and the related (whole) enterprise value. Begins by showing how the current stock price can be compounded forward to arrive at an expectation one or more years in the future. Describes the log normal distribution of the current stock price, the consistent updating of expectations, and the resolution of uncertainty through time.