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Deviations from Benford’s law in asset valuations: Market prices vs. expert estimates

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  • Cano-Rodríguez, Manuel

Abstract

This paper examines whether asset valuations based on human judgment deviate more from Benford’s Law (BL) than those based on market prices. Using over 120 million observations from SEC N-PORT filings, this paper uses the fair value hierarchy (FV1, FV2, FV3) to examine how different degrees of human input in asset valuation affect conformity with BL. Aggregate analysis shows that, although level 1 fair value valuations, based on market prices, conform more closely to Benford’s Law, deviations for expert-driven estimates—levels 2 and 3 fair value estimates—are remarkably modest. In the asset-category analysis, some FV1 values deviate more than their FV2 or FV3 counterparts. These findings caution against assuming that market prices always conform to BL or that expert-driven estimates necessarily diverge.

Suggested Citation

  • Cano-Rodríguez, Manuel, 2025. "Deviations from Benford’s law in asset valuations: Market prices vs. expert estimates," Finance Research Letters, Elsevier, vol. 86(PB).
    • Handle: RePEc:eee:finlet:v:86:y:2025:i:pb:s1544612325017465
    DOI: 10.1016/j.frl.2025.108492
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