ANALYSIS OF STOCK PRICE VALUATION: TRADITIONAL, DYNAMIC AND DYNAMIC EARNINGS MODELS

This study aims to analyse various stock valuation models, both traditional and dynamic models. The traditional model is represented by the dividend discount model (DDM) by Gordon (1962). The dynamic model uses three models proposed by Bakshi and Chen (2001), namely the stochastic interest model, the stochastic expected earnings growth model and the dynamic model. In addition, researchers also propose an alternative model based on the modified dynamic model by Bakshi and Chen: the dynamic earnings model. The models are tested for their superiority by using existing data on the Jakarta Stock Exchange. Results based on testing the absolute percentage over/undervaluation and the absolute Indonesian rupiah over/undervaluation demonstrate that the alternative model has advantages over the stochastic interest and stochastic expected earnings growth models, but shows no differences from the dynamic model or DDM.