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A comparative analysis of accounting-based valuation models

Ho, Kung-Cheng, Lee, Shih-Cheng, Lin, Chien-Ting and Yu, Min-Teh 2016, A comparative analysis of accounting-based valuation models, Journal of accounting, auditing & finance, In Press, pp. 1-15, doi: 10.1177/0148558X15623043.

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Title A comparative analysis of accounting-based valuation models
Author(s) Ho, Kung-Cheng
Lee, Shih-Cheng
Lin, Chien-TingORCID iD for Lin, Chien-Ting
Yu, Min-Teh
Journal name Journal of accounting, auditing & finance
Season In Press
Start page 1
End page 15
Total pages 15
Publisher Sage
Place of publication London, Eng.
Publication date 2016-01-28
ISSN 0148-558X
Keyword(s) accounting-based valuation models
residual income valuation
abnormal earnings growth
dividend model
switching regression model
Summary 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.
Language eng
DOI 10.1177/0148558X15623043
Field of Research 150103 Financial Accounting
1501 Accounting, Auditing And Accountability
1502 Banking, Finance And Investment
Socio Economic Objective 900101 Finance Services
HERDC Research category C1 Refereed article in a scholarly journal
ERA Research output type C Journal article
Copyright notice ©2016, The Author
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Document type: Journal Article
Collection: Department of Finance
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