Academic Activities
[Research]A Comparative Analysis of Accounting-Based Valuation Models
2016.01.01 Views 709 경영학연구분석센터
Journal of Accounting, Auditing & Finance
Jan 2016
Kung-Cheng Ho 1, Shih-Cheng Lee 2 3, Chien-Ting Lin 4, Min-Teh Yu 5 6
1 Zhongnan University of Economics and Law, Wuhan, China
2 Yuan Ze University, Chung-Li, Taiwan
3 University of Adelaide, Australia
4 Deakin University, Burwood, Australia
5 National Chiao Tung University, Hinchu, Taiwan
6 RIRC, National Cheng-Chi University, Taipei, Taiwan
http://journals.sagepub.com/doi/abs/10.1177/0148558X15623043
Abstract
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.
Jan 2016
Kung-Cheng Ho 1, Shih-Cheng Lee 2 3, Chien-Ting Lin 4, Min-Teh Yu 5 6
1 Zhongnan University of Economics and Law, Wuhan, China
2 Yuan Ze University, Chung-Li, Taiwan
3 University of Adelaide, Australia
4 Deakin University, Burwood, Australia
5 National Chiao Tung University, Hinchu, Taiwan
6 RIRC, National Cheng-Chi University, Taipei, Taiwan
http://journals.sagepub.com/doi/abs/10.1177/0148558X15623043
Abstract
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.