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Does Financial Condition of Companies Affect Predictive Accuracy of the DCF-model?

Author

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  • Nikita S. Fedorov

    (HSE University — St. Petersburg, Saint-Petersburg, Russian Federation)

Abstract

The DCF model is one of the most commonly used models in valuing companies for investment decisions. Nevertheless, estimating the accuracy of this model remains an important research question. This article presents an assessment of the accuracy of DCF model specifications based on analyzing the variance of fair share prices of companies listed on the S&P 500 stock index. The fair prices from the DCF model are calculated using artificial intelligence algorithms. The analysis of the DCF model’s accuracy includes a comparison of fair prices with market and realized prices, which increases the reliability of the empirical analysis. The study shows that the accuracy of fair prices calculated on the basis of the DCF model specifications varies depending on the financial performance of companies.

Suggested Citation

  • Nikita S. Fedorov, 2025. "Does Financial Condition of Companies Affect Predictive Accuracy of the DCF-model?," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 6, pages 99-112, December.
    • Handle: RePEc:fru:finjrn:250606:p:99-112
    DOI: 10.31107/2075-1990-2025-6-99-112
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    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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