A State Space Framework for the Residual Income Valuation Model of Stock Prices

2019 ◽  
Author(s):  
Faisal M. Awwal ◽  
Prasad V. Bidarkota
Keyword(s):  
State Space ◽  
Stock Prices ◽  
Residual Income ◽  
Valuation Model ◽  
Residual Income Valuation

A Comparative Analysis of Accounting-Based Valuation Models

2016 ◽  
Vol 32 (4) ◽  
pp. 561-575 ◽  
Author(s):  
Kung-Cheng Ho ◽  
Shih-Cheng Lee ◽  
Chien-Ting Lin ◽  
Min-Teh Yu
Keyword(s):  
Stock Prices ◽  
The Other ◽  
Residual Income ◽  
Switching Regression ◽  
Book Value ◽  
Earnings Growth ◽  
Valuation Model ◽  
Pricing Errors ◽  
Residual Income Valuation ◽  
Average Probability

We empirically compare the reliability of the dividend (DIV) model, the residual income valuation (CT, GLS) model, and the abnormal earnings growth (OJ) model. We find that valuation estimates from the OJ model are generally more reliable than those from the other three models, because the residual income valuation model anchored by book value gets off to a poor start when compared with the OJ model led by capitalized next-year earnings. We adopt a 34-year sample covering from 1985 to 2013 to compare the reliability of valuation estimates via their means of absolute pricing errors ( MAPE) and corresponding t statistics. We further use the switching regression of Barrios and Blanco to show that the average probability of OJ valuation estimates is greater in explaining stock prices than the DIV, CT, and GLS models. In addition, our finding that the OJ model yields more reliable estimates is robust to analysts-based and model-based earnings measures.

A Study of Stock Price Behavior in Taiwan via Residual Income Valuation Theory and Structural Identification

2012 ◽  
Vol 15 (04) ◽  
pp. 1250016 ◽  
Author(s):  
Keshin Tswei ◽  
Chen-Yin Kuo
Keyword(s):  
Behavioral Finance ◽  
Stock Prices ◽  
Stock Price ◽  
Information Diffusion ◽  
Value Relevance ◽  
Residual Income ◽  
Reduced Form ◽  
Valuation Theory ◽  
Long Run ◽  
Residual Income Valuation

This study adopts the methodology introduced by Lee (2006) to analyze stock prices in response to information shocks in six of Taiwan's stock market sectors and present market anomalies utilizing behavioral finance theory. Using the Residual Income Model (RIM) of equity valuation, we specified our empirical model to identify structural fundamental and nonfundamental shocks from reduced-form tangible and intangible news, and we obtained three major results. First, fundamental shock is primarily induced by tangible news and nonfundamental shock by intangible news, suggesting that tangible-oriented RIM can capture the information content of stock prices. Second, impulse response analyses show that investors generally underreact to fundamental shocks and consistently overreact to nonfundamental shocks in the short-run. This finding is compatible with the overconfidence theory of Daniel et al. (1998) in behavioral finance literature. Third, information diffusion efficiency in a market appears to depend on the value relevance quality of its tangible information. This is based on our finding that when tangible information constitutes a higher share of a market's fundamental shock, its price converges faster to the long-run equilibrium associated with the shock.

Unrecorded Intangible Assets: Abnormal Earnings and Valuation

2007 ◽  
Vol 21 (1) ◽  
pp. 23-41 ◽  
Author(s):  
Mark Kohlbeck ◽  
Terry D. Warfield
Keyword(s):  
Banking Industry ◽  
Intangible Assets ◽  
Residual Income ◽  
Equity Valuation ◽  
Analysis Framework ◽  
Valuation Model ◽  
Residual Income Valuation ◽  
The Impact

We use the unique banking industry setting to demonstrate the impact of unrecorded intangible assets on abnormal earnings and equity valuation in the context of the residual income valuation model. We show that the persistence of bank abnormal earnings and, consequently, the pricing multiples on bank abnormal earnings, vary with the level of unrecorded intangible assets. Our evidence suggests that unrecorded intangible assets are important in understanding the persistence and valuation of abnormal earnings in the banking industry. The analysis framework introduced in this paper could also be used to examine the valuation impacts of intangible assets in other industries.

scholarly journals PENILAIAN HARGA SAHAM PERUSAHAAN PEMBIAYAAN DI BURSA EFEK INDONESIA

2012 ◽  
Vol 12 (1) ◽  
pp. 87
Author(s):  
Kim Hong ◽  
Fakhruddin Nasution
Keyword(s):  
Cash Flow ◽  
Stock Prices ◽  
Stock Price ◽  
Free Cash Flow ◽  
Residual Income ◽  
Fundamental Analysis ◽  
Valuation Model ◽  
Model Free ◽  
Residual Income Model ◽  
Income Model

<span>The purpose of multi finance companies’ stock price valuation is to know their intrinsic <span>values by performing fundamental analysis using dividend discount model, free cash flow to the firm model, free cash flow to equity model, and residual income model. Research data uses secondary data in the period of 2006-2010 which consists of Indonesian Stock Price Composite Index (IHSG), and multi finance companies’ stock prices taken from Yahoo Finance; multi finance companies’ financial statements taken from Indonesian Stock Exchange (BEI) reports; multi finance industry data taken from Bapepam-LK. As a result of research, stock of ADMF is fair valued by using the analysis of dividend<br />discount model; undervalued by using the analysis of free cash flow to the firm and free cash flow to equity models; overvalued by using the analysis of residual income model. Stock of BFIN is undervalued by using the analysis of dividend discount, free cash flow to the firm, and free cash flow to equity models; overvalued by using the analysis of residual income model. Stock of MFIN is overvalued by using the analysis of dividend discount<br />and residual income models; undervalued by using the analysis of free cash flow to the firm and free cash flow to equity models. Statistic t-test shows that there are no significant differences to value stock prices using dividend discount, free cash flow to the firm, free cash flow to equity, and residual income models, therefore investment analyst or investor may use one of the chosen stock price valuation model.<br />Keywords: Multi finance companies, Fundamental analysis, Stock price valuation model, Intrinsic value, Required return, Investment risk<br /></span></span>

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