What is the intrinsic value of the dow?

We model the time-series relation between price and intrinsic Value as a co integrated system, so that price and Value are long-term convergent. In thi s framework, we compare the performance of alternative estimates of intrins ic Value for the Dow 30 stocks. During 1963-1996, traditional market multip les (e.g., B/P, E/P, and D/P ratios) have little predictive power. However, a V/P ratio, where V is based on a residual income Valuation model, has st atistically reliable predictive power. Further analysis shows time-varying interest rates and analyst forecasts are important to the success of V. Alt ernative forecast horizons and risk premia are less important.