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Making Sense of Asset Prices: A Guide to Required Yield Theory, Part 1 -- Valuing the Stock Market


  • Faugere, Christophe

    () (BEM Bordeaux School of Management)


The bad news is that there is widespread confusion about how asset prices are determined. The good news is that this series of short essays about Required Yield Theory aims at establishing a clear understanding of the underlying mechanisms behind asset prices. Installment # 1 covers the stock market. I survey the current state of knowledge regarding stock valuation and showcase the logical and empirical effectiveness of Required Yield Theory as it explains how the S&P 500 is valued. Based on the tenets and results of this new theory, I derive a list of key insights for investing in the S&P 500.

Suggested Citation

  • Faugere, Christophe, 2012. "Making Sense of Asset Prices: A Guide to Required Yield Theory, Part 1 -- Valuing the Stock Market," Journal of Financial Transformation, Capco Institute, vol. 34, pages 129-148.
  • Handle: RePEc:ris:jofitr:1471

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    More about this item


    Required Yield Theory; Stock Valuation; Fisher; Feldstein; taxes; GDP per capita growth;

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)


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