Stock duration
Stock duration of an equity stock is the percentage change in price in response to a 1% change in the long-term return that the stock is priced to deliver.
Duration
As per Dividend Discount Model: Formula for the duration of stock is as follows-
where
-
is the duration of stock under the DDM model -
is the discount rate -
is the expected growth rate in perpetuity
The other formula for the same is - D = saa
Modified duration
For the stock market as a whole, the modified duration is the price/dividend ratio, which for the S&P 500 was about 62 in February 2004.
See also
External links
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