Equity Valuation: Market-Share-Dynamics Effect on the Value of Multiple Product Lines

Abstract:     
This paper discusses methodological aspects of equity valuation (stock pricing) in the context of continuous-time finance. The special emphasis of this study is to provide a framework and explicit formulas for the balance-sheet itemization of the product line contributions to the welfare of the firm, and, in particular, product market share dynamics effect on the value of the product line, and on the value of the whole firm. The results were derived in the context of the general analytic theory of pricing and hedging of financial contracts in diffusive incomplete markets, and its applications in quantitative equity, both developed by the author in a series of previous works.

Keywords: market share, equity valuation, incomplete markets, hedging

JEL Classifications: G12, G13, G31, G35, D52

Working Paper Series