I'm trying to structure a market valuation model where I could keep updating the model with changes in the price of the S&P 500, changes estimated EPS, growth rate, dividend yield, discount rate and whatever variables I may want to input.

Any Suggestions??

Question

I'm trying to structure a market valuation model where I  could keep updating  the model with changes in the price of the S&P 500, changes estimated EPS, growth rate, dividend yield, discount rate and whatever variables I may want to input.

Any Suggestions??

anonymous · Answer

You have to choose a fair time interval, for eg. quarterly, semi annually or annually. Doing it on a daily data is inefficient because the relative changes to stock prices on a daily basis is not much, on average (of course there are exceptions). Also, you have to have a good reason for your model without which it would be a futile exercise. Hope that helps. SM

anonymous · Answer

Well basically I was planning on valuing say the S&P 500 using either a dividend discount model while incorporating share buybacks. The other option I was looking into is turning the dividends into free cash flows to equity, since not all firms pay out what they are able to in dividends or buy back as much stock as they truly could with the free cash flows that they have. My problem is in calculating free cash flows to equity for the S&P for example. Do you have to calculate it for each individual firm. If anyone has any good links or papers they could direct me to on how to do a free cash flow to equity model for the market that would be GREAT!