Deterministic connection between earnings and stock price

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The Ohlson valuation framework (e.g., the ** model) provides an explicit deterministic connection between earnings and stock price. On the other hand, Von Neumann-Morganstern Utility Theory merely describes human behavior. However, the 2 theories ought to agree, if each is useful in explaining investment decision-making. If we learn/believe that future earnings will be higher than had been previously thought, should the stock price go up, according to the Ohlson valuation framework? Why or why not?

Reference no: EM13954229

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