sim_div {exuber} | R Documentation |
Simulation of dividends
Description
Simulate (log) dividends from a random walk with drift.
Usage
sim_div(
n,
mu,
sigma,
r = 0.05,
log = FALSE,
output = c("pf", "d"),
seed = NULL
)
Arguments
n |
A positive integer specifying the length of the simulated output series. |
mu |
A scalar indicating the drift. |
sigma |
A positive scalar indicating the standard deviation of the innovations. |
r |
A positive value indicating the discount factor. |
log |
Logical. If true dividends follow a lognormal distribution. |
output |
A character string giving the fundamental price("pf") or dividend series("d"). Default is ‘pf’. |
seed |
An object specifying if and how the random number generator (rng)
should be initialized. Either NULL or an integer will be used in a call to
|
Details
If log is set to FALSE (default value) dividends follow:
where . The default parameters
are
,
and
(the initial value of the dividend sequence).
The above equation can be solved to yield the fundamental price:
If log is set to TRUE then dividends follow a lognormal distribution or log(dividends) follow:
where . Default parameters are
,
. The fundamental price in this case is:
where .
All default parameter values are those suggested by West (1988).
Value
A numeric vector of length n.
References
West, K. D. (1988). Dividend innovations and stock price volatility. Econometrica: Journal of the Econometric Society, p. 37-61.
Examples
# Price is the sum of the bubble and fundamental components
# 20 is the scaling factor
pf <- sim_div(100, r = 0.05, output = "pf", seed = 123)
pb <- sim_evans(100, r = 0.05, seed = 123)
p <- pf + 20 * pb
autoplot(p)