The Samuelson model

The Samuelson model is an economic theory that explains how prices in financial markets, like stock prices, are influenced by expectations about future dividends or earnings. It suggests that current asset prices are equal to the present value of all expected future benefits, discounted at a certain rate. This means that if investors expect higher future dividends, current prices tend to increase, and vice versa. The model helps investors and economists understand how expectations about the future impact current market prices, emphasizing the importance of predicting future economic conditions in making investment decisions.