This paper tests the empirical validity of the Ohlson (1995) model on a firm-level time series basis. The coefficients of the earnings dynamic and valuation equations are first estimated by OLS. Next, recognizing the nonlinear relationships among the parameters, each equation is estimated by...

This paper tests the empirical validity of the <link rid="b20">Ohlson (1995)</link> model on a firm-level time series basis. The coefficients of the earnings dynamic and valuation equations are first estimated by OLS. Next, recognizing the nonlinear relationships among the parameters, each equation is estimated by...

The Ohlson (1995) model assumes that abnormal earnings follow an AR(1) process primarily for reasons of mathematical tractability. However, the empirical literature on the Garman and Ohlson (1980) model finds that the data support an AR(2) lag structure for earnings, book values and dividends....