How to properly value the stock market, from 40-year UCLA professor - Business Insider

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Brad Cornell has been teaching finance at UCLA for almost 40 years. He shares the precise way to calculate the true value of the S&P 500 — and explains why investors need to 'be careful out there.'

"I've been a professor of finance for over 40 years, primarily at the Anderson Graduate School of Management at UCLA," he said on the "" podcast. "So I've been following and analyzing financial markets for more than 40 years."

"What determines intrinsic value is the cash flow to equity holders that an investment can produce," he said. "So if we're looking at the entireat the forefront of nearly every investors mind, corporate earnings set to tumble, and markets in disarray, Cornell set out to develop a tool that market participants could employ to find the true value of the S&P 500.

"The tables start with an estimate of the intrinsic value of the S&P 500 index of 3,221," Cornell penned in a recent article for. "This is calculated by discounting expected cash payouts on the index to present value as of early February 2020 at a discount rate of 6.70%."

 

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