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On the importance of asset pricing factors in the relative valuation
ID Skočir, Matevž (Author), ID Lončarski, Igor (Author)

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Abstract
In this study, we examine the implications of multi-factor asset pricing models in corporate valuation, focusing on the relative valuation approach. Our investigation centers around an eight-factor model, which we compare against traditional valuation methods that rely on industry or risk grouping and cross-sectional averages. The purpose of this comparison is to assess the efficacy of incorporating pricing factor variables into the valuation process and to understand their impact on valuation accuracy. The findings of our analysis suggest that the use of the eight-factor model leads to a reduction in estimation errors of valuation multiples, indicating an important improvement in precision compared to conventional valuation methods. Additionally, our research offers insights into the practicality of applying multi-factor models. It contributes to the intersection between empirical asset pricing and corporate finance by providing a detailed evaluation of advanced valuation models and their relevance in improving the accuracy of relative valuation.

Language:English
Keywords:enterprises, asset allocation, risk management, models, relative valuation, market multiples, multi-factor asset pricing models, valuation errors
Work type:Article
Typology:1.01 - Original Scientific Article
Organization:EF - School of Economics and Business
Publication status:Published
Publication version:Version of Record
Year:2024
Number of pages:18 str.
Numbering:Vol. 70, pt. B, art. 102366
PID:20.500.12556/RUL-158418 This link opens in a new window
UDC:336
ISSN on article:0275-5319
DOI:10.1016/j.ribaf.2024.102366 This link opens in a new window
COBISS.SI-ID:194092547 This link opens in a new window
Publication date in RUL:07.06.2024
Views:127
Downloads:27
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Record is a part of a journal

Title:Research in international business and finance
Shortened title:Res. int. bus. financ.
Publisher:Elsevier
ISSN:0275-5319
COBISS.SI-ID:512590361 This link opens in a new window

Licences

License:CC BY-NC 4.0, Creative Commons Attribution-NonCommercial 4.0 International
Link:http://creativecommons.org/licenses/by-nc/4.0/
Description:A creative commons license that bans commercial use, but the users don’t have to license their derivative works on the same terms.

Secondary language

Language:Slovenian
Keywords:podjetje, alokacija premoženja, obvladovanje tveganj, modeli

Projects

Funder:ARRS - Slovenian Research Agency
Project number:P5-0161
Name:Izzivi vlagateljev, podjetij, finančnih institucij in države v negotovem evropskem gospodarskem okolju

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