Ungarbled earnings and dividends. An analysis and extension of the Beaver, Lambert, and Morse valuation model

This paper examines the Beaver, Lambert, and Morse (1980) valuation model that capitalizes 'ungarbled' earnings. The analysis identifies the model's unspecified capitalization factor, and it emphasizes that a complete model of ungarbled earnings must focus on the joint stochastic behavior of earnings and dividends. It is shown that expected ungarbled earnings, scaled for a constant, equal expected dividends. Except for the scale factor, no apparent economic reasons suggest that ungarbled earnings are any different from dividends.