STUDYING OF EQUITY VALUATION MODELS BASED ON THE GROWTH IN EXPECTED EARNINGS

Subject Areas : Financial Knowledge of Securities Analysis

Received: 2014-11-22 Accepted : 2014-11-22 Published : 2008-09-22

Keywords: Cost of Capital, Expected earnings, short-term and long-term&#x0D, &#x0D, gro, Permanent earnings, Expected abnormal earnings, Expected&#x0D, &#x0D, dividend,

Abstract :

The purpose of this study is to develop an equity valuation modelthat relates contemporaneous accounting data and growth in expectedearnings to evaluate firm value, and incorporates both short-term aswell as long-term growth in expected earnings , and non-recurringitems. This paper assumes and “Information Dynamic” so it followsthe modeling in Ohlson (1995) but with an extension to permitgrowth and non-recurring items, The analyses show that the valuationfunction consists of three terms (1) permanent earnings modeladjusted for non-recurring items, (2) current non-recurring item and(3) a multiplier that mirrors both short-term and long-term growth,which multiplies next period expected earnings. This study is anempirical research and model examination an theory processing isdone inductively. All of the hypothesis are tested by Wilcox onsigned rank test. The result of this research indicates that all of thethree models among calculative firm value and firm market value nosignificant deference is found.