Uncertainty in firm valuation and a cross-sectional misvaluation measure

نویسندگان

چکیده

Abstract The degree of uncertainty associated with the value a company plays relevant role in valuation analysis. We propose an original and robust methodology for market valuation, which replaces traditional point estimate conventional Discounted Cash Flow model probability distribution fair values that convey information about both expected its intrinsic uncertainty. Our depends on two main ingredients: econometric revenues set firm-specific balance sheet relations are estimated using historical data. explore effectiveness scope our through series statistical exercises publicly traded U.S. companies. At firm level, we show derived constitutes reliable predictor company’s future abnormal returns. long-short (LSV) factor, built buy-sell recommendations based distribution, contains not accessible factors. LSV factor significantly increases explanatory predictive power models portfolios individual stock

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ژورنال

عنوان ژورنال: Annals of Finance

سال: 2023

ISSN: ['1614-2446', '1614-2454']

DOI: https://doi.org/10.1007/s10436-022-00423-w