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Model Risk in the Valuation of Shares by the Multiplier Method
[Модельный Риск При Оценке Акций Методом Мультипликаторов]

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  • Minasyan, Vigen B. (Минасян, Виген)

    (Russian Presidential Academy of National Economy and Public Administration (RANEPA))

  • Ivko, Daria (Ивко, Дарья)

    (Russian Presidential Academy of National Economy and Public Administration (RANEPA))

Abstract

This paper considers the problem of applying the method of market multipliers in assessing the value of companies in eight major industries of the Russian Federation, possibility and correctness of application of multipliers of analogical companies, advantages and disadvantages of the method. The volatility of price multipliers (P/E, P/B) is estimated. The existence of a link between the volatility of stock prices and the volatility of price multipliers (P / E, P / B) is revealed, the strength and direction of these links are analyzed. Based on the results of the study, the possibility and correctness of using multiples of analogical companies in estimating the value of Russian companies is given.

Suggested Citation

  • Minasyan, Vigen B. (Минасян, Виген) & Ivko, Daria (Ивко, Дарья), 2018. "Model Risk in the Valuation of Shares by the Multiplier Method [Модельный Риск При Оценке Акций Методом Мультипликаторов]," Working Papers 051801, Russian Presidential Academy of National Economy and Public Administration.
    • Handle: RePEc:rnp:wpaper:051801
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    References listed on IDEAS

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    1. Sanjeev Bhojraj & Charles M. C. Lee, 2002. "Who Is My Peer? A Valuation‐Based Approach to the Selection of Comparable Firms," Journal of Accounting Research, Wiley Blackwell, vol. 40(2), pages 407-439, May.
    2. Ou, Ja & Penman, Sh, 1989. "Accounting Measurement, Price Earnings Ratio, And The Information-Content Of Security Prices," Journal of Accounting Research, Wiley Blackwell, vol. 27, pages 111-144.
    3. Alford, Aw, 1992. "The Effect Of The Set Of Comparable Firms On The Accuracy Of The Price Earnings Valuation Method," Journal of Accounting Research, Wiley Blackwell, vol. 30(1), pages 94-108.
    4. Jing Liu & Doron Nissim & Jacob Thomas, 2002. "Equity Valuation Using Multiples," Journal of Accounting Research, Wiley Blackwell, vol. 40(1), pages 135-172, March.
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