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Market Value Approximation Using Multiples: An Investigation of American Large-, Mid-, and Small-Cap Stocks

Berglund, Oscar LU and Zisiadou, Argyro LU (2015) BUSN89 20151
Department of Business Administration
Abstract
The aim of this paper is to provide answers to questions related to valuation accuracy and error determinants by investigating the US market over the last 15 years (2000-2014). The first questions are related to the market efficiency in its weak form, while the rest of the paper is focused on valuation accuracy using the multiples approach and the error determinant variables that can influence the valuation accuracy. The main results for the market efficiency are that only the small capitalization index (S&P 600) is efficient in its weak form. Regarding valuation accuracy, it was discovered that the 12-month forward-looking multiples are more accurate at approximating market values than trailing multiples. In addition, the authors were... (More)
The aim of this paper is to provide answers to questions related to valuation accuracy and error determinants by investigating the US market over the last 15 years (2000-2014). The first questions are related to the market efficiency in its weak form, while the rest of the paper is focused on valuation accuracy using the multiples approach and the error determinant variables that can influence the valuation accuracy. The main results for the market efficiency are that only the small capitalization index (S&P 600) is efficient in its weak form. Regarding valuation accuracy, it was discovered that the 12-month forward-looking multiples are more accurate at approximating market values than trailing multiples. In addition, the authors were able to conclude that equity multiples performed better than entity multiples. Lastly, through estimations, it is proven that valuation errors are influenced by specific error determinants both from the current period and the past period observations, while the valuation error of the previous year appears to have a significant influence on the new valuation error. (Less)
Please use this url to cite or link to this publication:
author
Berglund, Oscar LU and Zisiadou, Argyro LU
supervisor
organization
course
BUSN89 20151
year
type
H1 - Master's Degree (One Year)
subject
keywords
Valuation Error, Valuation Accuracy, Error Determinants, Multiples, Market Efficiency, US market, Capitalization
language
English
id
5474068
date added to LUP
2015-06-16 16:36:54
date last changed
2015-06-16 16:36:54
@misc{5474068,
  abstract     = {The aim of this paper is to provide answers to questions related to valuation accuracy and error determinants by investigating the US market over the last 15 years (2000-2014). The first questions are related to the market efficiency in its weak form, while the rest of the paper is focused on valuation accuracy using the multiples approach and the error determinant variables that can influence the valuation accuracy. The main results for the market efficiency are that only the small capitalization index (S&P 600) is efficient in its weak form. Regarding valuation accuracy, it was discovered that the 12-month forward-looking multiples are more accurate at approximating market values than trailing multiples. In addition, the authors were able to conclude that equity multiples performed better than entity multiples. Lastly, through estimations, it is proven that valuation errors are influenced by specific error determinants both from the current period and the past period observations, while the valuation error of the previous year appears to have a significant influence on the new valuation error.},
  author       = {Berglund, Oscar and Zisiadou, Argyro},
  keyword      = {Valuation Error,Valuation Accuracy,Error Determinants,Multiples,Market Efficiency,US market,Capitalization},
  language     = {eng},
  note         = {Student Paper},
  title        = {Market Value Approximation Using Multiples: An Investigation of American Large-, Mid-, and Small-Cap Stocks},
  year         = {2015},
}