This paper reviews research that uses big data and/or machine learning methods to provide insight relevant for equity valuation. Given the huge volume of research in this area, the review focuses on studies that either use or inform on accounting variables. The article concludes by providing...

Classic value investing à la Graham & Dodd (1934) focuses on selecting stocks that seem cheap relative to their intrinsic value and fundamental quality. We use Bayesian inference to account for the large amount of uncertainty within intrinsic value estimation. We find that an...

We use earnings forecasts from a cross-sectional model to proxy for cash flow expectations and estimate the implied cost of capital (ICC) for a large sample of firms over 1968-2008. The earnings forecasts generated by the cross-sectional model are superior to analysts' forecasts in terms of...

We evaluate the influence of measurement error in analysts' forecasts on the accuracy of implied cost of capital estimates from various implementations of the ‘implied cost of capital' approach, and develop corrections for the measurement error. We document predictable error in the implied...

Pushing models to extremes can expose output biases that stem from underlying assumptions. In the case of industry standard option valuation models, long term, high volatility securities provide a stress test vehicle. For instance, in evaluating a stock with 60% volatility, industry standard...

We estimate implied cost of equity capital for a sample of firms from 1984 to 1998 using the Ohlson and Juettner (2000) model that does not make restrictive assumptions about clean surplus and payout policies. We find that cost of equity capital is strongly positively associated with...

Recently, Easton and Sommers (2006) provide evidence of a pervasive upward bias of about 3.5 per cent in implied cost of equity estimators arising from persistent optimistic analysts' forecast of earnings. Deng, Kim and Yeo (2006) derive an estimation procedure that infers the bias in earnings...

We value a company that targets its capital structure in book-value terms. This capital structure definition provides us with a Value of Tax Shields that lies between those of Modigliani-Miller (fixed debt) and Miles-Ezzell (fixed market-value leverage ratio). If a company targets its leverage...

In addition to other contributions to the literature, this note shows how value created can be measured if firms are financed not only by equity, but also by debt. We deal with this capital structure using the weighted average cost of capital (WACC) approach. We show that measuring value...

This paper compares estimates of value derived from conventional discounted cash flow and price earnings valuation methods to the market price. For a sample of 45 firms newly listed on the New Zealand Stock Exchange our results suggest that the best discounted cash flow method and the best price...