Stock Valuation and Investment Strategies

Topics:
Investment Strategy
Tags:
Earnings Per Share,
Finance,
Financial Accounting,
Investment,
Investment Strategy,
Stock,
York University
Source:
York University

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Overview: This article studies the relative investment performance of several stock-valuation measures. The first is mispricing based on the valuation model developed by Bakshe and Chen (1998) and extended by Dong (1998) (hereafter, the BCD model). The BCD model relates, in closed form, a stock's fair value to the firm's net earnings per share (EPS), the expected future EPS growth and long-term rate. The second is a value/ price (V/P) ratio based on the Lee-Myers-Swaminathan (1999) residual-income model. The best investment strategy is to combine the BCD model mispricing with momentum rankings.

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Format: PDF | Size: 448KB | Date: Jun 2001 | Pages: 55

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