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Valuation Methodology from the Perspective of Different Investor Types

In: Investor Relations and ESG Reporting in a Regulatory Perspective

Author

Listed:
  • Poul Lykkesfeldt
  • Laurits Louis Kjaergaard

Abstract

Different types of investors apply several different valuation methods. Typically, the more established an investor is, the more dedicated resources, time, skills and efforts they apply to understand in detail the companies in their portfolio and target investments. This chapter studies typical institutional investor and bottom-up investing as opposed to the typical retail investor who often applies the top-down methodology. We explore the two main types of investor groups for equities, institutional investors and retail investors. Any company should strive for a balanced investor base to achieve the lowest possible risk premium because investors have different risk profiles, investment mandates and wish lists to determine which companies to invest in. Different investor types have different investment strategies. Institutional investors are dictated in the investment mandate stipulated in the public prospectus typically offered to their existing and potential investors. Retail investors are more flexible and can apply a combination of the strategies depending on the market opportunities that they find. We believe that investment strategies are likely the most researched in finance; therefore, we also highlight the most significant types.

Suggested Citation

  • Poul Lykkesfeldt & Laurits Louis Kjaergaard, 2022. "Valuation Methodology from the Perspective of Different Investor Types," Springer Books, in: Investor Relations and ESG Reporting in a Regulatory Perspective, chapter 0, pages 37-41, Springer.
    • Handle: RePEc:spr:sprchp:978-3-031-05800-4_6
    DOI: 10.1007/978-3-031-05800-4_6
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