Academics have concluded that the model is inconsistent with rational valuation of the stock market.

http://en.wikipedia.org/wiki/Fed_model

Criticism

Criticism on the Fed model has been harsh, and a number of papers with creative titles were published by academia such as "The fed model: The bad, the worse, and the ugly" and "Fight the FED model". Academics have concluded that the model is inconsistent with rational valuation of the stock market.