Technical Note | HBS Case Collection | August 2001

Technical Note on Expectations

by Carliss Y. Baldwin

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.

Citation:

Baldwin, Carliss Y. "Technical Note on Expectations." Harvard Business School Technical Note 902-055, August 2001.