Accounting-based valuations and market prices of equity: Case of Russian market
This paper analyzes models of equity valuation which are based on accounting data of equity book value, net income, and residual earnings. Research is focused on the problem of validity of different analytical models which is defined by the ability of a model to produce fundamental valuations closely connected with market valuations of equity. This paper investigates versions of residual income model (RIM) under different modifications of linear information dynamics (LID). All models developed in this paper are tested on the data of Russian stock market from 2000 to 2005 year, which was booming during this period. Results showed that accounting-based valuation models have good explanation characteristics on Russian emerging market. The version of RIM which rests on assumption that investors base their expectations about future amounts of net income totally on current net incomes gives highest correlation between fundamental and market valuations of equity amounted to R-square 0,83. The version of RIM which rests on assumption that investors base their expectations about future amounts of residual earnings totally on current residual earnings gives correlation between fundamental and market valuations of equity amounted to R-square 0,78. These results could prove a hypothesis about opacity of emerging markets: on these markets investors base their expectations mainly on current information which is available and relevant for forecasting.
|Date of creation:||2007|
|Date of revision:|
|Contact details of provider:|| Postal: 3, Volkhovsky per., Saint Petersburg, 199004|
Phone: Phone: (+7-812) 323 8456
Fax: (+7-812) 329 3234
Web page: http://dspace.gsom.pu.ru/jspui/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:sps:wpaper:44. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lena Manaeva)The email address of this maintainer does not seem to be valid anymore. Please ask Lena Manaeva to update the entry or send us the correct email address
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.