When analyzing or the value of a firm, there are three basic questions that we need to address: How much is the firm generating as earnings? How much capital has been invested in its existing investments? How much has the firm borrowed? In answering these questions, we depend upon accounting...

The most difficult companies to value are at either end of the life cycle, with young growth companies and declining companies posing the biggest challenges. In this paper, we focus on companies that are at the tail end of their life cycles and examine how best to value companies with flat and...

The “going public” process is under strain, as the characteristics of companies going public, and the investor base investing in those companies’ IPOs, has changed. In addition to companies going public with more unformed business models, many of these companies market themselves to...

As both investors and firms globalize, it should come as no surprise that valuing these firms brings special challenges. In this paper, we look at firms that not only operate in many countries but also in diverse businesses. The different risk, growth and cash flow profiles of the cash flow...

As the center of gravity shifts from developed markets in the United States to emerging markets in Asia and Latin America, analysts are also grappling with estimation questions that arise more frequently with emerging market companies. In this paper, we begin by looking at common errors that...

In traditional valuation models, we begin by forecasting earnings and cash flows and discount these cash flows back at an appropriate discount rate to arrive at the value of a firm or asset. This task is simpler when valuing firms with positive earnings, a long history of performance and a large...

The parameters of the return process of a firm are determined by two elements—the <italic>natural event structure</italic>, i.e., the process by which nature affects the value of the firm, and the <italic>information structure</italic>, i.e., the process by which information about these events is collected and disseminated to...

In recent years, both practitioners and academics have argued that traditional discounted cash flow models do a poor job of capturing the value of the options embedded in many corporate actions. This paper shows how option pricing models used in valuing financial assets can be used to value...

One measure of market efficiency is the speed with which prices adjust to new information. The author develops a simple approach to estimating these price adjustment coefficients by using the information in return processes. This approach is used to estimate t he price adjustment coefficients...

There is substantial evidence that insider trading is present around corporate announcements and that this insider trading is motivated by private information. Using real estate investment trusts that choose to reappraise themselves as our sample, we establish that the appraisals contain...