The full text of this article

 

Performance evaluation of two earnings based valuation models in detecting equity mispricing and growth option of firms
by Mohammad A. Karim; Shaorong Zhang
International Journal of Behavioural Accounting and Finance (IJBAF), Vol. 5, No. 3/4, 2015

 

Abstract: We compare two models that attempt to identify mispricing and growth option of firms: The residual income model (RIM) of Ohlson (1995) and a model developed by Rhodes-Kropf, Robinson, and Viswanathan (2005) (RKRV). For the sample of US publicly traded stocks for the period from 1971 to 2005, we find that we are able to calculate valuation measures for substantially more firm-years using RKRV than RIM. Sample firms for RKRV model tend to be smaller and have higher market-to-book ratio than sample firms using RIM model. More importantly, in a significant number of firm-years, these models disagree on whether a firm is misvalued or has high growth option considerably. We also find some differences between these two models in detecting misvaluation and/or growth option around events where extant literature suggests an important role for misvaluation or growth option, such as mergers and acquisitions, open market share repurchases, and stock splits.

Online publication date: Tue, 15-Mar-2016

 

is only available to individual subscribers or to users at subscribing institutions.

 
Existing subscribers:
Go to Inderscience Online Journals to access the Full Text of this article.

 
Pay per view:
If you are not a subscriber and you just want to read the full contents of this article, buy online access here.

 
Complimentary Subscribers, Editors or Members of the Editorial Board of the International Journal of Behavioural Accounting and Finance (IJBAF):
Login with your Inderscience username and password:

 

    Username:        Password:         

Forgotten your password?


 
Want to subscribe?
A subscription gives you complete access to all articles in the current issue, as well as to all articles in the previous three years (where applicable). See our Orders page to subscribe.

 
If you still need assistance, please email subs@inderscience.com