Access the full text.
Sign up today, get DeepDyve free for 14 days.
Russell Lundholm, T. O'Keefe (2001)
Reconciling Value Estimates from the Discounted Cash Flow Model and the Residual Income ModelContemporary Accounting Research, 18
David Peterson (1995)
The Informative Role of the Value Line Investment Survey: Evidence from Stock HighlightsJournal of Financial and Quantitative Analysis, 30
Bradford Cornell (1993)
Corporate Valuation: Tools for Effective Appraisal and Decision-Making
Jeffery Abarbanell (1991)
Do analysts' earnings forecasts incorporate information in prior stock price changes?Journal of Accounting and Economics, 14
Gerald Feltham, James Ohlson (1995)
Valuation and Clean Surplus Accounting for Operating and Financial ActivitiesContemporary Accounting Research, 11
(1998)
A comparison of dividend , cash flow , and earnings approaches to equity valuation
Brian Bushee (1999)
Do Institutional Investors Prefer Near-Term Earnings Over Long-Run Value?Capital Markets: Asset Pricing & Valuation
Scott Stickel (1992)
Reputation and Performance Among Security AnalystsJournal of Finance, 47
Donna Philbrick, W. Ricks (1991)
Using Value Line And Ibes Analyst Forecasts In Accounting ResearchJournal of Accounting Research, 29
Christine Botosan (1997)
Disclosure level and the cost of equity capitalAccounting review: A quarterly journal of the American Accounting Association, 72
W. Bondt, R. Thaler (1990)
Do Security Analysts OverreactThe American Economic Review, 80
Gerald Feltham, James Ohlson (1999)
Residual Earnings Valuation With Risk and Stochastic Interest RatesThe Accounting Review, 74
J. Francis, Per Olsson, D. Oswald (2000)
Comparing the Accuracy and Explainability of Dividend, Free Cash Flow, and Abnormal Earnings Equity Value EstimatesJournal of Accounting Research, 38
(1995)
Valuation: Measuring and managing the value
Theodore Sougiannis, Takashi Yaekura (2000)
The Accuracy and Bias of Equity Values Inferred from Analysts' Earnings ForecastsJournal of Accounting, Auditing & Finance, 16
Richard Frankel, Charles Lee (1998)
Accounting valuation, market expectation, and cross-sectional stock returnsJournal of Accounting and Economics, 25
Patricia Dechow (1994)
Accounting earnings and cash flows as measures of firm performance : The role of accounting accrualsJournal of Accounting and Economics, 18
S. Bandyopadhyay, L. Brown, G. Richardson (1995)
Analysts' Use of Earnings Forecasts in Predicting Stock Returns: Forecast Horizon EffectsFinancial Accounting
Jeffery Abarbanell, V. Bernard (2000)
Is the Us Stock Market Myopic?UNC: Accounting (Topic)
Huberman Huberman, Kandel Kandel (1987)
Value Line rank and sizeJournal of Business, 60
William Gebhardt, Charles Lee, B. Swaminathan (2000)
Toward an Implied Cost of CapitalCorporate Finance and Organizations eJournal
S. Penman (1997)
A Synthesis of Equity Valuation Techniques and the Terminal Value Calculation for the Dividend Discount ModelReview of Accounting Studies, 2
J. Kmenta (1972)
Elements of econometrics
Gur Huberman, Shmuel Kandel (1987)
Value Line Rank and Firm SizeThe Journal of Business, 60
Gebhardt Gebhardt, Lee Lee, Swaminathan Swaminathan (2001)
Toward an implied cost of capitalJournal of Accounting Research, 39
Russell Lundholm, T. O'Keefe (2000)
Reconciling Value Estimates from the Discounted Cash Flow Value Model and the Residual Income ModelCapital Markets: Asset Pricing & Valuation
Peter Goulet, George Foster (1980)
Financial Statement Analysis.Journal of Finance, 35
James Ohlson (1995)
Earnings, Book Values, and Dividends in Equity Valuation*Contemporary Accounting Research, 11
Abarbanell (1992)
Tests of analysts' overreaction/underreaction to earnings information as an explanation for abnormal stock price behaviorJournal of Finance, 47
E. Fama, K. French (1997)
Industry costs of equityJournal of Financial Economics, 43
Abarbanell (2000)
Is the US stock market myopic?Journal of Accounting Research, 38
(1992)
Tests of analysts
Bushee (2001)
Do institutional investors prefer near-term earnings over long-run value?Contemporary Accounting Research, 18
(2000)
Equity Valuation Employing Terminal Value Expressions
V. Bernard (1995)
The Feltham-Ohlson Framework: Implications for Empiricists*Contemporary Accounting Research, 11
T. Copeland, D. Mayers (1982)
The value line enigma (1965-1978) : A case study of performance evaluation issuesJournal of Financial Economics, 10
Recently, Penman and Sougiannis (1998) and Francis, Olsson, and Oswald (2000) compared the bias and accuracy of the discounted cash flow model (DCF) and Edwards‐Bell‐Ohlson residual income model (RIM) in explaining the relation between value estimates and observed stock prices. Both studies report that, with non‐price‐based terminal values, RIM outperforms DCF. Our first research objective is to explore the question whether, over a five‐year valuation horizon, DCF and RIM are empirically equivalent when Penman's (1997) theoretically “ideal” terminal value expressions are employed in each model. Using Value Line terminal stock price forecasts at the horizon to proxy for such values, we find empirical support for the prediction of equivalence between these valuation models. Thus, the apparent superiority of RIM does not hold in a level playing field comparison. Our second research objective is to demonstrate that, within each class of the DCF and RIM valuation models, the model that employs Value Line forecasted price in the terminal value expression generates the lowest prediction errors, compared with models that employ non‐price‐based terminal values under arbitrary growth assumptions. The results indicate that, for both DCF and RIM, price‐based valuation models outperform the corresponding non‐price‐based models by a wide margin. These results imply that researchers should exercise care in interpreting findings from models using ad hoc terminal value expressions.
Contemporary Accounting Research – Wiley
Published: Dec 1, 2001
Read and print from thousands of top scholarly journals.
Already have an account? Log in
Bookmark this article. You can see your Bookmarks on your DeepDyve Library.
To save an article, log in first, or sign up for a DeepDyve account if you don’t already have one.
Copy and paste the desired citation format or use the link below to download a file formatted for EndNote
Access the full text.
Sign up today, get DeepDyve free for 14 days.
All DeepDyve websites use cookies to improve your online experience. They were placed on your computer when you launched this website. You can change your cookie settings through your browser.