  This chapter presents a review of the dividend discount models starting from
the basic models (Williams 1938, Gordon and Shapiro 1956) to more recent and
complex models (Ghezzi and Piccardi 2003, Barbu et al. 2017, D'Amico and De
Blasis 2018) with a focus on the modelling of the dividend process rather than
the discounting factor, that is assumed constant in most of the models. The
Chapter starts with an introduction of the basic valuation model with some
general aspects to consider when performing the computation. Then, Section 1.3
presents the Gordon growth model (Gordon 1962) with some of its extensions
(Malkiel 1963, Fuller and Hsia 1984, Molodovsky et al. 1965, Brooks and Helms
1990, Barsky and De Long 1993), and reports some empirical evidence. Extended
reviews of the Gordon stock valuation model and its extensions can be found in
Kamstra (2003) and Damodaran (2012). In Section 1.4, the focus is directed to
more recent advancements which make us of the Markov chain to model the
dividend process (Hurley and Johnson 1994, Yao 1997, Hurley and Johnson 1998,
Ghezzi and Piccardi 2003, Barbu et al. 2017, D'Amico and De Blasis 2018). The
advantage of these models is the possibility to obtain a different valuation
that depends on the state of the dividend series, allowing the model to be
closer to reality. In addition, these models permit to obtain a measure of the
risk of the single stock or a portfolio of stocks.
