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A Comparison of Equity Valuation Models: Empirical Evidence from a Sample of UK Companies
European Journal of Multidisciplinary Studies
View Archive Info| Field | Value | |
| Title |
A Comparison of Equity Valuation Models: Empirical Evidence from a Sample of UK Companies
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| Creator |
Kim, Ja Ryong
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| Description |
This paper aims to answer one main question: can the superior models in accounting field be superior in finance field? That is, can models that generate a better approximation to stock price also generate higher returns in the future? To answer this question, I conduct pricing errors analysis and time-series returns analysis. The most important finding is models that approximate stock price better tend to produce higher returns in the future; implying findings in accounting literature have practical implications to analysts and investors. The consistent rankings of models are observed throughout the research: forward earnings multiples perform the best, followed by fundamental valuation models and historical earnings multiples, and book value and sales multiples worst. However, multiples are ranked rather as a group in the UK. Interestingly, residual income models produce similar returns to forward earnings multiples, but the accuracy of their estimates varies depending on their terminal value assumptions.
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| Publisher |
EUSER
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| Date |
2019-06-29
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| Type |
info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion Peer-reviewed Article |
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| Identifier |
http://journals.euser.org/index.php/ejms/article/view/4360
10.26417/ejms-2019.v4i2-544 |
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| Source |
European Journal of Multidisciplinary Studies; Vol 4 No 2 (2019): EJMS May - August 2019; 105-120
2414-8385 2414-8377 10.26417/ejms-2019.v4i2 |
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| Language |
eng
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| Relation |
http://journals.euser.org/index.php/ejms/article/view/4360/4229
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| Rights |
Copyright (c) 2019 European Journal of Multidisciplinary Studies
http://creativecommons.org/licenses/by/4.0 |
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