No. 1114 - Assessing the risks of asset overvaluation: models and challenges

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by Sara Cecchetti and Marco TabogaApril 2017

We propose methods to compute confidence bands for the fundamental values of stocks and corporate bonds. These methods take into account uncertainty about future cash flows and about the discount factors used to discount the cash flows. We use them to assess the current degree of under-/over-valuation of asset prices. We find no evidence of over-valuation of the stocks and corporate bonds of the major economies.

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