Re: Fundamentals

[John Vertegaal <vertegaa@xxxxxxxxx>]

"John M. Legge" <jlegge@xxxxxxxxxxxxxx> wrote:

>Dixit and Pindyck, in their "Investment Under Uncertainty"
>were able to demonstrate a method for determining the
>fundamental value of a revenue stream modelled as a
>geometric random walk.  This is nonstationary and therefore
>nonergodic.

IMHO, Dixit and Pindyck, and by implication JML and anyone
else putting their _faith_ in microeconomic determinants
are pushing on strings.  The interest rate, so called
"determined" by the CB, may very well be disequilibriating,
throwing all relevant determinate equations out of the
window.  The quest for microeconomic fundamentals _is_
nonsense.

John V