A fractional cointegration approach to testing the Ohlson accounting based valuation model

Lee, Shih-Cheng, Lin, Chien-Ting and Yu, Min-Teh 2013, A fractional cointegration approach to testing the Ohlson accounting based valuation model, Review of quantitative finance and accounting, vol. 41, no. 3, pp. 535-547.

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Title A fractional cointegration approach to testing the Ohlson accounting based valuation model
Author(s) Lee, Shih-Cheng
Lin, Chien-Ting
Yu, Min-Teh
Journal name Review of quantitative finance and accounting
Volume number 41
Issue number 3
Start page 535
End page 547
Total pages 13
Publisher Springer Science & Business Media
Place of publication Dordrecht, The Netherlands
Publication date 2013-10
ISSN 0924-865X
Keyword(s) book value
residual income
Ohlson model
value relevance
Summary We examine the long-run relationship between market value, book value, and residual income in the Ohlson (Contemp Acc Res 11(2):661-687, 1995) model. In particular, we test if market value is cointegrated with book value and residual income in light of their non-stationary behaviors. We find that cointegration applies to only 51 % of the sample firms, casting doubt that book value and residual income alone are adequate in tracking variations in market value, yet we find that market value is fractional cointegrated with book value and residual income for 89 % of the sample firms. This implies that the long-run relationship follows a slow but mean-reverting process. Our results therefore support the Ohlson model. © 2012 Springer Science+Business Media New York.
Language eng
Field of Research 150103 Financial Accounting
Socio Economic Objective 900101 Finance Services
HERDC Research category C1 Refereed article in a scholarly journal
HERDC collection year 2013
Copyright notice ©2013, Springer
Persistent URL http://hdl.handle.net/10536/DRO/DU:30056366

Document type: Journal Article
Collection: School of Accounting, Economics and Finance
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