Grinold and Kroner Model

[DHAB]

Hi Guys,
In Grinold and Kroner Model, is it:
D/P = Current Dividend/ Current Price
or
D1/P0 = Dividend in next Period/ Current Price at t=0
I am a bit confused as I have seen both.
Thanks a lot for you help.

 

[Aether]

It’s the expected dividend yield, D1.

 

[S2000magician]

As G-K is estimating the (future) return, it’s logical that it’d be the forward dividend yield; and so it is.
I wrote a brief article on Grinold-Kroner that may be useful: http://financialexamhelp123.com/grinold-kroner-model/. The one thing that I do explicitly that I haven’t seen elsewhere is write %ΔS for the percentage change in shares outstanding and %Δ(P/E) for the percentage change in the P/E ratio. I think that it’s better to be perfectly clear that they’re percentage changes (in the notation), not absolute changes.

 

[DHAB]

thanks guys, much appreciate it.

 

[S2000magician]

My pleasure.