The effect of the set of comparable firms on the accuracy of the price-earnings valuation method
Article Abstract:
The price-earnings (P/E) valuation method measures a firm's stock price against its earnings capacity and the P/E multiple calculated from a range of comparable firms. The method's accuracy is tested in the selection of comparable firms based on industry type, risk, and earnings growth. Industry basis and a combination of risk and earnings growth best determine firm comparability. However, practice shows industry basis is used more often since companies in the same industry approximate similar risk and earnings growth and follow similar accounting methods. Large firms have greater use of the industry based selection than small firms. Valuation accuracy is positively related to firm size and negatively related to leverage differences adjustment.
Publication Name: Journal of Accounting Research
Subject: Business
ISSN: 0021-8456
Year: 1992
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Unsystematic security price movements, management earnings forecasts, and revisions in consensus analyst earnings forecasts
Article Abstract:
The relationship between unsystematic security returns and earnings forecasts by management and revisions in consensus financial analyst forecasts is examined. Cross-sectional variations in abnormal stock performance subsequent to a public earnings projection by management are explained by the unexpected component of the management forecast and by revisions to the consensus analyst forecast.
Publication Name: Journal of Accounting Research
Subject: Business
ISSN: 0021-8456
Year: 1987
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Price-signal relations in an imperfectly competitive financial market with public and private information
Article Abstract:
The author criticizes R.J. Lundholm's paper regarding the relationship between imperfect competition and price-signal relations. Models of imperfect competition, and how perfect competition fosters symmetric linear equilibrium and possibility of multiplicity are examined.
Publication Name: Journal of Accounting Research
Subject: Business
ISSN: 0021-8456
Year: 1999
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